10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2006
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission File Number: 1-9047

Independent Bank Corp.

(Exact name of registrant as specified in its charter)

Massachusetts	04-2870273
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
288 Union Street Rockland, Massachusetts (Address of principal executive offices)	02370 (Zip Code)

Registrant’s telephone number, including area code:

(781) 878-6100

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.0l par value per share Preferred Stock Purchase Rights	Nasdaq Global Select Market Nasdaq Global Select Market

Securities registered pursuant to section 12(b) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):

Large Accelerated filer o     Accelerated filer þ     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

The aggregate market value of the voting common stock held by non-affiliates of the registrant, computed by reference to the closing price of such stock on June 30, 2006, was approximately $446,729,890

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. January 31, 2007: 14,502,235

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).

Portions of the Registrant’s definitive proxy statement for its 2007 Annual Meeting of Stockholders are incorporated into Part III, Items 10-13 of this Form 10-K.

INDEPENDENT BANK CORP.

2006 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

			Page
Part I
	Item 1.	Business		4
		General		4
		Market Area and Competition		4
		Lending Activities		4
		Investment Activities		10
		Sources of Funds		10
		Investment Management, Retail Investments and Insurance		11
		Regulation		12
		Statistical Disclosure by Bank Holding Companies		17
		Securities and Exchange Commission Availability of Filings on Company Website		17
	Item 1A.	Risk Factors		18
	Item 1B.	Unresolved Staff Comments		19
	Item 2.	Properties		19
	Item 3.	Legal Proceedings		20
	Item 4.	Submission of Matters to a Vote of Security Holders		20
Part II
	Item 5.	Market for Independent Bank Corp.’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		21
		Table 1 — Price Range of Common Stock		21
		Table 2 — Issuer Purchases of Equity Securities		23
	Item 6.	Selected Financial Data		24
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
		Table 3 — Loan Portfolio Composition		32
		Table 4 — Scheduled Contractual Loan Amortization		33
		Table 5 — Summary of Delinquency Information		34
		Table 6 — Nonperforming Assets		36
		Table 7 — Summary of Changes in the Allowance for Loan Losses		38
		Table 8 — Summary of Allocation of Allowance for Loan Losses		40
		Table 9 — Amortized Cost of Securities Held to Maturity		42
		Table 10 — Fair Value of Securities Available for Sale		42
		Table 11 — Amortized Cost of Securities Held to Maturity — Amounts Maturing		42
		Table 12 — Fair Value of Securities Available for Sale — Amounts Maturing		43
		Table 13 — Average Balances of Deposits		43
		Table 14 — Maturities of Time Certificates of Deposits Over $100,000		44
		Table 15 — Average Balance, Interest Earned/Paid & Average Yields		47
		Table 16 — Volume Rate Analysis		48
		Table 17 — Non-Interest Income		50
		Table 18 — Non-Interest Expense		51
		Table 19 — New Markets Tax Credit Recognition Schedule		52

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			Page
		Table 20 — Interest Rate Derivatives		55
		Table 21 — Fair Value of Residential Mortgage Loan Commitments and Forward Sales Agreements		56
		Table 22 — Interest Rate Sensitivity		57
		Table 23 — Expected Maturities of Long Term Debt and Interest Rate Derivatives		58
		Table 24 — Capital Ratios for the Company and the Bank		59
		Table 25 — Contractual Obligations, Commitments, and Off-Balance Sheet Financial Instruments by Maturity		60
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		63
	Item 8.	Financial Statements and Supplementary Data		64
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		111
	Item 9A.	Controls and Procedures		111
	Item 9B.	Other Information		113
Part III
	Item 10.	Directors, Executive Officers and Corporate Governance		113
	Item 11.	Executive Compensation		113
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		113
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		113
	Item 14.	Principal Accounting Fees and Services		113
Part IV
	Item 15.	Exhibits, Financial Statement Schedules		114
Signatures				118
Exhibit 31.1 — Certification 302				120
Exhibit 31.2 — Certification 302				121
Exhibit 32.1 — Certification 906				122
Exhibit 32.2 — Certification 906				123

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

A number of the presentations and disclosures in this Form 10-K, including, without limitation, statements regarding the level of allowance for loan losses, the rate of delinquencies and amounts of charge-offs, and the rates of loan growth, and any statements preceded by, followed by, or which include the words “may,” “could,” “should,” “will,” “would,” “hope,” “might,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “assume” or similar expressions constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements, implicitly and explicitly, include the assumptions underlying the statements and other information with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates, intentions, financial condition, results of operations, future performance and business, including the Company’s expectations and estimates with respect to the Company’s revenues, expenses, earnings, return on equity, return on assets, efficiency ratio, asset quality and other financial data and capital and performance ratios.

Although the Company believes that the expectations reflected in the Company’s forward-looking statements are reasonable, these statements involve risks and uncertainties that are subject to change based on various important factors (some of which are beyond the Company’s control). The following factors, among others, could cause the Company’s financial performance to differ materially from the Company’s goals, plans, objectives, intentions, expectations and other forward-looking statements:

•  A weakening in the strength of the United States economy in general and the strength of the regional and local economies within the New England region and Massachusetts which could result in a deterioration on credit quality, a change in the allowance for loan losses or a reduced demand for the Company’s credit or fee-based products and services;

•  adverse changes in the local real estate market, as most of the Company’s loans are concentrated in southeastern Massachusetts and Cape Cod and a substantial portion of these loans have real estate as collateral, could result in a deterioration of credit quality and an increase in the allowance for loan loss;

•  the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System could affect the Company’s business environment or affect the Company’s operations;

•  the effects of, any changes in, and any failure by the Company to comply with tax laws generally and requirements of the federal New Markets Tax Credit program in particular could adversely affect the Company’s tax provision and its financial results;

•  inflation, interest rate, market and monetary fluctuations could reduce net interest income and could increase credit losses;

•  adverse changes in asset quality could result in increasing credit risk-related losses and expenses;

•  competitive pressures could intensify and affect the Company’s profitability, including as a result of continued industry consolidation, the increased financial services provided by non-banks and banking reform;

•  a deterioration in the conditions of the securities markets could adversely affect the value or credit quality of the Company’s assets, the availability and terms of funding necessary to meet the Company’s liquidity needs and the Company’s ability to originate loans;

•  the potential to adapt to changes in information technology could adversely impact the Company’s operations and require increased capital spending;

•  changes in consumer spending and savings habits could negatively impact the Company’s financial results; and

•  future acquisitions may not produce results at levels or within time frames originally anticipated and may result in unforeseen integration issues.

If one or more of the factors affecting the Company’s forward-looking information and statements proves incorrect, then the Company’s actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Form 10-K. Therefore, the Company cautions you not to place undue reliance on the Company’s forward-looking information and statements.

The Company does not intend to update the Company’s forward-looking information and statements, whether written or oral, to reflect change. All forward-looking statements attributable to the Company are expressly qualified by these cautionary statements.

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PART I.

Item 1.   Business

General

Independent Bank Corp. (the “Company”) is a state chartered, federally registered bank holding company headquartered in Rockland, Massachusetts that was incorporated under Massachusetts law in 1985. The Company is the sole stockholder of Rockland Trust Company (“Rockland” or the “Bank”), a Massachusetts trust company chartered in 1907. Rockland is a community-oriented commercial bank. The community banking business, the Company’s only reportable operating segment, consists of commercial banking, retail banking, investment management services, retail investments and insurance sales and is managed as a single strategic unit. The community banking business derives its revenues from a wide range of banking services, including lending activities, acceptance of demand, savings, and time deposits, investment management and trust services, retail investments and insurance services, and mortgage banking income. Rockland offers a full range of community banking services through its network of 52 banking offices (including 50 full-service branches), nine commercial banking centers, three investment management group offices, and four residential lending centers, which are located in the Plymouth, Norfolk, Barnstable and Bristol counties of southeastern Massachusetts and Cape Cod. At December 31, 2006, the Company had total assets of $2.8 billion, total deposits of $2.1 billion, stockholders’ equity of $229.8 million, and 708 full-time equivalent employees.

Market Area and Competition

The Bank contends with considerable competition both in generating loans and attracting deposits. The Bank’s competition for loans is primarily from other commercial banks, savings banks, credit unions, mortgage banking companies, insurance companies, finance companies, and other institutional lenders. Competitive factors considered for loan generation include interest rates and terms offered, loan fees charged, loan products offered, service provided, and geographic locations.

In attracting deposits, the Bank’s primary competitors are savings banks, commercial and co-operative banks, credit unions, internet banks, as well as other non-bank institutions that offer financial alternatives such as brokerage firms and insurance companies. Competitive factors considered in attracting and retaining deposits include deposit and investment products and their respective rates of return, liquidity, and risk among other factors, such as, convenient branch locations and hours of operation, personalized customer service, online access to accounts, and automated teller machines.

The Bank’s market area is attractive and entry into the market by financial institutions previously not competing in the market area may continue to occur. The entry into the market area by these institutions, and other non-bank institutions that offer financial alternatives could impact the Bank’s growth or profitability.

Lending Activities

The Bank’s gross loan portfolio (loans before allowance for loan losses) amounted to $2.0 billion on December 31, 2006 or 71.6% of total assets on that date. The Bank classifies loans as commercial, business banking, real estate, or consumer. Commercial loans consist primarily of loans to businesses with credit needs in excess of $250,000 and revenue in excess of $2.5 million for working capital and other business-related purposes and floor plan financing. Business banking loans consist primarily of loans to businesses with commercial credit needs of less than or equal to $250,000 and revenues of less than $2.5 million. Real estate loans are comprised of commercial mortgages that are secured by non-residential properties, residential mortgages that are secured primarily by owner-occupied residences and mortgages for the construction of commercial and residential properties. Consumer loans consist primarily of automobile loans and home equity loans.

The Bank’s borrowers consist of small-to-medium sized businesses and retail customers. The Bank’s market area is generally comprised of the Plymouth, Norfolk, Barnstable and Bristol Counties located in southeastern Massachusetts and Cape Cod. Substantially all of the Bank’s commercial, business banking and consumer loan portfolios consist of loans made to residents of and businesses located in southeastern Massachusetts and Cape Cod. The majority of the real estate loans in the Bank’s loan portfolio are secured by properties located within this market area.

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Interest rates charged on loans may be fixed or variable and vary with the degree of risk, loan term, underwriting and servicing costs, loan amount and the extent of other banking relationships maintained with customers. Rates are further subject to competitive pressures, the current interest rate environment, availability of funds and government regulations.

The Bank’s principal earning assets are its loans. Although the Bank judges its borrowers to be creditworthy, the risk of deterioration in borrowers’ abilities to repay their loans in accordance with their existing loan agreements is inherent in any lending function. Participating as a lender in the credit market requires a strict underwriting and monitoring process to minimize credit risk. This process requires substantial analysis of the loan application, an evaluation of the customer’s capacity to repay according to the loan’s contractual terms, and an objective determination of the value of the collateral. The Bank also utilizes the services of an independent third-party consulting firm to provide loan review services, which consist of a variety of monitoring techniques performed after a loan becomes part of the Bank’s portfolio.

The Bank’s Controlled Asset and Consumer Collections Departments are responsible for the management and resolution of nonperforming assets. In the course of resolving nonperforming loans, the Bank may choose to restructure certain contractual provisions. Nonperforming assets are comprised of nonperforming loans, nonperforming securities and Other Real Estate Owned (“OREO”). Nonperforming loans consist of loans that are more than 90 days past due but still accruing interest and nonaccrual loans. OREO includes properties held by the Bank as a result of foreclosure or by acceptance of a deed in lieu of foreclosure. In order to facilitate the disposition of OREO, the Bank may finance the purchase of such properties at market rates, if the borrower qualifies under the Bank’s standard underwriting guidelines. The Bank had one property held as OREO for both periods ending December 31, 2006 and December 31, 2005.

Origination of Loans  Commercial and industrial loan applications are obtained through existing customers, solicitation by Bank personnel, referrals from current or past customers, or walk-in customers. Commercial real estate loan applications are obtained primarily from previous borrowers, direct contact with the Bank, or referrals. Business banking loan applications are typically originated by the Bank’s retail staff, through a dedicated team of business officers, by referrals from other areas of the Bank, referrals from current or past customers or through walk-in customers. Customers for residential real estate loans are referred to Mortgage Loan Officers who will meet with the borrowers at the borrower’s convenience. Pre-approvals may be completed by a customer online via a seamless link to the Federal National Mortgage Association’s (“FNMA”) Loan Portal through the Company’s website. Residential real estate loan applications primarily result from referrals by real estate brokers, homebuilders, and existing or walk-in customers. The Bank also maintains a staff of field originators who solicit and refer residential real estate loan applications to the Bank. These employees are compensated on a commission basis and provide convenient origination services during banking and non-banking hours. The Company uses a select group of third party originators to generate additional real estate loan volume. The loans are underwritten and closed in the name of the Bank. Volume generated by these third party originators was less than 5% of total origination in 2006. Consumer loan applications are directly obtained through existing or walk-in customers who have been made aware of the Bank’s consumer loan services through advertising and other media, as well as indirectly through a network of automobile, recreational vehicle, and boat dealers.

Commercial and industrial loans, commercial real estate loans, and construction loans may be approved by commercial loan underwriters up to their individually assigned lending limits, which are established and modified periodically by management, with ratification by the Board of Directors, to reflect the officer’s expertise and experience. Any of those types of loans which are in excess of a commercial loan officer’s assigned lending authority must be approved by various levels of authority within the Commercial Lending Division, depending on the loan amount, up to and including the Senior Loan Committee and, ultimately, the Executive Committee of the Board of Directors.

Business banking loans may be approved by business banking underwriters up to their individually assigned lending limits which are established and modified periodically by the Director of Consumer and Business Banking and ratified by the Board of Directors to reflect the officer’s expertise and experience. The Director of Consumer and Business Banking’s lending limit is recommended by the Chief Financial Officer (“CFO”) and ratified by the

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Board of Directors. Any loan which is in excess of the business banking officer’s assigned lending authority must be approved by the Director of Consumer and Business Banking.

Residential real estate and construction loans may be approved by residential underwriters and residential loan analysts up to their individually assigned lending limits, which are established and modified periodically by management, with ratification by the Board of Directors, to reflect the underwriter’s and analyst’s expertise and experience. Any loan which is in excess of the residential underwriter’s and residential analyst’s assigned residential lending authority must be approved by various levels of authority within the Residential Lending Division, depending on the loan amount, up to and including the Senior Loan Committee and, ultimately, the Executive Committee of the Board of Directors.

Consumer loans may be approved by consumer lenders up to their individually assigned lending limits which are established and modified periodically by the Consumer Loan Administrator and the Director of Consumer and Business Banking to reflect the officer’s expertise and experience. The Director of Consumer and Business Banking’s lending limit is recommended by the CFO and ratified by the Board of Directors. Any loan which is in excess of the consumer lender’s assigned lending authority must be approved by the Consumer Loan Administrator or the Director of Consumer and Business Banking.

In accordance with governing banking statutes, Rockland is permitted, with certain exceptions, to make loans and commitments to any one borrower, including related entities, in the aggregate amount of not more than 20% of the Bank’s stockholders’ equity, which is the “Banks legal lending limit” or $53.3 million at December 31, 2006. Notwithstanding the foregoing, the Bank has established a more restrictive limit of not more than 75% of the Bank’s legal lending limit, or $40.0 million at December 31, 2006, which may only be exceeded with the approval of the Board of Directors. There were no borrowers whose total indebtedness in aggregate exceeded $40.0 million as of December 31, 2006.

Sale of Loans  The Bank’s residential real estate loans are generally originated in compliance with terms, conditions and documentation which permit the sale of such loans to the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”), and other investors in the secondary market. Loan sales in the secondary market provide funds for additional lending and other banking activities. The Bank sells the servicing on a majority of the sold loans for a servicing released premium, simultaneous with the sale of the loan. As part of its asset/liability management strategy, the Bank may retain a portion of the adjustable rate residential real estate loan originations for its portfolio. During 2006, the Bank originated $209.7 million in residential real estate loans of which $34.0 million was retained in its portfolio, comprised primarily of adjustable rate loans.

Commercial and Industrial Loans  The Bank offers secured and unsecured commercial loans for business purposes, including issuing letters of credit. At December 31, 2006, $174.4 million, or 8.6% of the Bank’s gross loan portfolio consisted of commercial and industrial loans. Commercial and industrial loans generated 8.0%, 7.2%, and 6.9% of total interest income for the fiscal years ending 2006, 2005 and 2004, respectively.

Commercial loans may be structured as term loans or as revolving lines of credit. Commercial term loans generally have a repayment schedule of five years or less and, although the Bank occasionally originates some commercial term loans with interest rates which float in accordance with a designated index rate, the majority of commercial term loans have fixed rates of interest. The majority of commercial term loans are collateralized by equipment, machinery or other corporate assets. In addition, the Bank generally obtains personal guarantees from the principals of the borrower for virtually all of its commercial loans. At December 31, 2006, there were $63.8 million of term loans in the commercial loan portfolio.

Collateral for commercial revolving lines of credit may consist of accounts receivable, inventory or both, as well as other business assets. Commercial revolving lines of credit generally are reviewed on an annual basis and usually require substantial repayment of principal during the course of a year. The vast majority of these revolving lines of credit have variable rates of interest. At December 31, 2006, there were $110.6 million of revolving lines of credit in the commercial loan portfolio.

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The Bank’s standby letters of credit generally are secured, generally have terms of not more than one year, and are reviewed for renewal in general on an annualized basis. At December 31, 2006, the Bank had $8.3 million of commercial and standby letters of credit.

The Bank also provides automobile and, to a lesser extent, boat and other vehicle floor plan financing. Floor plan loans are secured by the automobiles, boats, or other vehicles, which constitute the dealer’s inventory. Upon the sale of a floor plan unit, the proceeds of the sale are applied to reduce the loan balance. In the event a unit financed under a floor plan line of credit remains in the dealer’s inventory for an extended period, the Bank requires the dealer to pay-down the outstanding balance associated with such unit. Bank personnel make unannounced periodic inspections of each dealer to review the value and condition of the underlying collateral. At December 31, 2006, there were $14.1 million in floor plan loans, all of which have variable rates of interest.

Business Banking Loans  The business banking initiative caters to all of the banking needs of businesses with commercial credit requirements and revenues typically less than or equal to $250,000 and $2.5 million respectively, with automated loan underwriting capabilities and new loan and deposit products. Business banking loans totaled $59.9 million at December 31, 2006, or 3.0% of the Bank’s gross loan portfolio. Business banking loans generated 2.9%, 2.4%, and 1.3% of total interest income for the fiscal years ending 2006, 2005 and 2004, respectively.

Business banking loans may be structured as term loans, lines of credit including overdraft protection, owner and non-owner occupied commercial mortgages and standby letters of credit. Business banking generally obtains personal guarantees from the principals of the borrower for virtually all of its loan products.

Business banking term loans generally have an amortization schedule of five years or less and, although business banking occasionally originates some term loans with interest rates that float in accordance with the prime rate, the majority of business banking term loans have fixed rates of interest. The majority of business banking term loans are collateralized by machinery, equipment and other corporate assets. At December 31, 2006, there were $20.2 million of term loans in the business banking loan portfolio.

Business banking lines of credit and overdraft protection may be offered on an unsecured basis to qualified applicants. Collateral for secured lines of credit and overdraft protection typically consists of accounts receivable and inventory as well as other business assets. Business banking lines of credit and overdraft protection are reviewed on a periodic basis based upon the total amount of exposure to the customer and are typically written on a demand basis. The vast majority of these lines of credit and overdraft protection have variable rates of interest. At December 31, 2006, there were $33.8 million of lines of credit and overdraft protection in the business banking loan portfolio.

Both business banking owner and non-owner occupied commercial mortgages typically have an amortization schedule of twenty years or less but are written with a five year maturity. The majority of business banking owner occupied commercial mortgages have fixed rates of interest that are adjusted typically every three to five years. The majority of business banking owner occupied commercial mortgages are collateralized by first or second mortgages on owner occupied commercial real estate. At December 31, 2006, there were $3.4 million of owner occupied commercial mortgages in the business banking loan portfolio.

Business banking’s standby letters of credit generally are secured, have expirations of not more than one year, and are reviewed periodically for renewal. The business banking team makes use of the Bank’s authority as a preferred lender with the U.S. Small Business Administration. At December 31, 2006, there were $3.7 million of U.S. Small Business Administration guaranteed loans in the business banking loan portfolio.

Real Estate Loans  The Bank’s real estate loans consist of loans secured by commercial properties, loans secured by one-to-four family residential properties, and construction loans. As of December 31, 2006, the Bank’s loan portfolio included $740.5 million in commercial real estate loans, $390.2 million in residential real estate loans, $119.7 million in commercial construction loans and $7.3 million in residential construction loans, altogether totaling 62.1% of the Bank’s gross loan portfolio. Real estate loans generated an aggregate of 48.2%, 47.5%, and 46.2% of total interest income for the fiscal years ending December 31, 2006, 2005 and 2004, respectively.

The Bank’s commercial real estate portfolio is well-diversified with loans secured by a variety of property types, such as owner-occupied and non-owner-occupied commercial, retail, office, industrial, warehouse and other

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special purpose properties, such as hotels, motels, restaurants, and golf courses. Commercial real estate also includes loans secured by certain residential-related property types including multi-family apartment buildings, residential development tracts and, to a lesser extent, condominiums. The following pie chart shows the diversification of the commercial real estate portfolio as of December 31, 2006.

Commercial Real Estate Portfolio by Property Type

Although terms vary, commercial real estate loans generally have maturities of five years or less, amortization periods of 20 years, and interest rates that either float in accordance with a designated index or have fixed rates of interest. It is also the Bank’s policy to obtain personal guarantees from the principals of the borrower on commercial real estate loans and to obtain financial statements at least annually from all commercial and multi-family borrowers.

Commercial real estate lending entails additional risks as compared to residential real estate lending. Commercial real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers. Development of commercial real estate projects also may be subject to numerous land use and environmental issues. The payment experience on such loans is typically dependent on the successful operation of the real estate project, which can be significantly impacted by supply and demand conditions in the market for commercial and retail space.

Rockland originates both fixed-rate and adjustable-rate residential real estate loans. The Bank will lend up to 100% of the lesser of the appraised value of the residential property securing the loan or the purchase price, and generally requires borrowers to obtain private mortgage insurance when the amount of the loan exceeds 80% of the value of the property. The rates of these loans are typically competitive with market rates. The Bank’s residential real estate loans are generally originated only under terms, conditions and documentation, which permit sale in the secondary market.

The Bank generally requires title insurance protecting the priority of its mortgage lien, as well as fire, extended coverage casualty and flood insurance when necessary in order to protect the properties securing its residential and other real estate loans. Independent appraisers appraise properties securing all of the Bank’s first mortgage real estate loans.

Construction loans are intended to finance the construction of residential and commercial properties, including loans for the acquisition and development of land or rehabilitation of existing homes. Construction loans generally have terms of six months, but not more than two years. They usually do not provide for amortization of the loan balance during the term. The majority of the Bank’s commercial construction loans have floating rates of interest based upon the Rockland base rate or the prime rate published daily in the Wall Street Journal.

A significant portion of the Bank’s construction lending is related to one-to-four family residential development within the Bank’s market area. The Bank typically has focused its construction lending on relatively small

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projects and has developed and maintains a relationship with a significant number of homebuilders in the Plymouth, Norfolk, Barnstable and Bristol Counties of southeastern Massachusetts and Cape Cod.

Construction loans are generally considered to present a higher degree of risk than permanent real estate loans. A borrower’s ability to complete construction may be affected by a variety of factors such as adverse changes in interest rates and the borrower’s ability to control costs and adhere to time schedules.

Consumer Loans  The Bank makes loans for a wide variety of personal needs. Consumer loans primarily consist of installment loans, home equity loans, overdraft protection, and personal lines of credit. As of December 31, 2006, $532.9 million, or 26.3%, of the Bank’s gross loan portfolio consisted of consumer loans. Consumer loans generated 22.2%, 20.8% and 20.1% of total interest income for the fiscal years ending December 31, 2006, 2005, and 2004, respectively.

The Bank’s installment loans consist primarily of automobile loans, which totaled $206.8 million, at December 31, 2006, or 10.2% of loans, a decrease from 12.9% of loans at year-end 2005, and a decrease from 14.8% of loans at year-end 2004. A substantial portion of the Bank’s automobile loans are originated indirectly by a network of approximately 185 new and used automobile dealers located within the Bank’s market area. Although employees of the dealer take applications for such loans, the loans are made pursuant to Rockland’s underwriting standards using Rockland’s documentation. A Rockland loan officer must approve all indirect loans. In addition to indirect automobile lending, the Bank also originates automobile loans directly.

The maximum term for the Bank’s automobile loans is 84 months for a new car loan and 72 months with respect to a used car loan. Loans on new and used automobiles are generally made without recourse to the dealer. The Bank requires all borrowers to maintain automobile insurance, including full collision, fire and theft, with a maximum allowable deductible and with the Bank listed as loss payee. In addition, in order to mitigate the adverse effect on interest income caused by prepayments, dealers are required to maintain a reserve, of up to 3% of the outstanding balance of the indirect loans originated by them under Reserve option “A”. Reserve option “A” allows the Bank to be rebated the prepaid dealer reserve on a pro-rata basis in the event of prepayment prior to maturity. Reserve option “B” allows the dealer to share the reserve with the Bank, split 75/25, however for the Bank’s receipt of 25%, no rebates are applied to the account after 90 days from date of first payment. Indirect automobile loans at December 31, 2006, had a weighted average FICO¹ score of 721 and a weighted average combined loan to value ratio of 98.9%.

The Bank’s consumer loans also include home equity, unsecured loans and loans secured by deposit accounts, loans to purchase motorcycles, recreational vehicles, motor homes, boats, or mobile homes. The Bank generally will lend up to 100% of the purchase price of vehicles other than automobiles with terms of up to three years for motorcycles and up to fifteen years for recreational vehicles.

Home equity loans and lines may be made as a fixed rate term loan or under a variable rate revolving line of credit secured by a first or second mortgage on the borrower’s residence or second home. At December 31, 2006, $80.2 million, or 28.9%, of the home equity portfolio were term loans and $196.8 million, or 71.1%, of the home equity portfolio were revolving lines of credit. The Bank will originate home equity loans and lines in an amount up to 89.9% of the appraised value or on-line valuation, reduced for any loans outstanding secured by such collateral. Home equity loans and lines are underwritten in accordance with the Bank’s loan policy which includes a combination of credit score, loan to value ratio², employment history and debt to income ratio. Home equity lines of credit at December 31, 2006, had a weighted average FICO¹ score of 749 and a weighted average combined loan to value ratio of 58.0%.

¹ FICO — represents a credit score determined by the Fair Isaac Corporation, with data provided by the three major credit repositories (Trans Union, Experian, and Equifax). This score predicts the likelihood of loan default. The lower the score, the more likely an individual is to default. The actual FICO scores range from 300 to 850 (fairissaac.com).

² Loan to Value — is the ratio of the total potential exposure on a loan to the fair market value of the collateral. The higher the Loan to Value, the higher the loss risk in the event of default.

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Cash reserve loans are made pursuant to previously approved unsecured cash reserve lines of credit. The rate on these loans is tied to the prime rate.

Investment Activities

The Bank’s securities portfolio consists of U.S. Treasury and U.S. Government agency obligations, state, county and municipal securities, mortgage-backed securities, collateralized mortgage obligations, Federal Home Loan Bank (“FHLB”) stock, corporate debt securities and equity securities held for the purpose of funding supplemental executive retirement plan obligations through a Rabbi Trust. Most of these securities are investment grade debt obligations with average lives of five years or less. U.S. Treasury and U.S. Government agency securities entail a lesser degree of risk than loans made by the Bank by virtue of the guarantees that back them, require less capital under risk-based capital rules than non-insured or non-guaranteed mortgage loans, are more liquid than individual mortgage loans, and may be used to collateralize borrowings or other obligations of the Bank. The Bank views its securities portfolio as a source of income and liquidity. Interest and principal payments generated from securities provide a source of liquidity to fund loans and meet short-term cash needs. The Bank’s securities portfolio is managed in accordance with the Rockland Trust Company Investment Policy adopted by the Board of Directors. The Chief Executive Officer or the Chief Financial Officer may make investments with the approval of one additional member of the Asset/Liability Management Committee, subject to limits on the type, size and quality of all investments, which are specified in the Investment Policy. The Bank’s Asset/Liability Management Committee, or its appointee, is required to evaluate any proposed purchase from the standpoint of overall diversification of the portfolio. At December 31, 2006, securities totaled $517.3 million. Total securities generated interest and dividends on securities of 17.8%, 21.8%, and 25.5% of total interest income for the fiscal years ended 2006, 2005 and 2004, respectively. The chart below shows the level of securities versus assets for the year end 2004, 2005 and 2006.

Level of Securities/Assets
(Dollars in thousands)

Sources of Funds

Deposits  Deposits obtained through Rockland’s branch banking network have traditionally been the principal source of the Bank’s funds for use in lending and for other general business purposes. The Bank has built a stable base of in-market core deposits from consumers, businesses, and municipalities located in southeastern Massachusetts and Cape Cod. Rockland offers a range of demand deposits, interest checking, money market accounts, savings accounts, and time certificates of deposit. Interest rates on deposits are based on factors that include loan demand, deposit maturities, alternative costs of funds, and interest rates offered by competing financial institutions in the Bank’s market area. The Bank believes it has been able to attract and maintain satisfactory levels of deposits based on the level of service it provides to its customers, the convenience of its banking locations, and its interest rates that are generally competitive with those of competing financial institutions. Rockland has a municipal banking department that focuses on providing service to local municipalities. At December 31, 2006, there were municipal deposits from customers of $122.0 million which are included in total deposits. As of December 31, 2006, total deposits were $2.1 billion.

Rockland’s branch locations are supplemented by the Bank’s internet banking services as well as automated teller machine (“ATM”) cards and debit cards, which may be used to conduct various banking transactions at ATMs

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maintained at each of the Bank’s full-service offices and four additional remote ATM locations. The ATM cards and debit cards also allow customers access to the “NYCE” regional ATM network, as well as the “Cirrus” nationwide ATM network. In addition, Rockland is a member of the “SUM” network, which allows access to 2,800 participating ATM machines free of surcharge. These networks provide the Bank’s customers access to their accounts through ATMs located throughout Massachusetts, the United States, and the world. The debit card also can be used at any place that accepts MasterCard worldwide.

Borrowings  Borrowings consist of short-term and intermediate-term obligations. Short-term borrowings can consist of FHLB advances, federal funds purchased, treasury tax and loan notes and assets sold under repurchase agreements. In a repurchase agreement transaction, the Bank will generally sell a security agreeing to repurchase either the same or a substantially identical security on a specified later date at a price slightly greater than the original sales price. The difference in the sale price and purchase price is the cost of the proceeds recorded as interest expense. The securities underlying the agreements are delivered to the dealer who arranges the transactions as security for the repurchase obligation. Payments on such borrowings are interest only until the scheduled repurchase date, which generally occurs within a period of 30 days or less. Repurchase agreements represent a non-deposit funding source for the Bank and the Bank is subject to the risk that the purchaser may default at maturity and not return the collateral. In order to minimize this potential risk, the Bank only deals with established investment brokerage firms when entering into these transactions. On December 31, 2006, the Bank had $25.0 million outstanding under these repurchase agreements with investment brokerage firms. In addition to agreements with brokers, the Bank has entered into similar agreements with its customers. At December 31, 2006, the Bank had $83.2 million of customer repurchase agreements outstanding.

In July 1994, Rockland became a member of the FHLB of Boston. Among the many advantages of this membership, this affiliation provides the Bank with access to short-to-medium term borrowing capacity. At December 31, 2006, the Bank had $305.1 million outstanding in FHLB borrowings with initial maturities ranging from 3 months to 20 years. In addition, the Bank had $198.7 million of borrowing capacity remaining with the FHLB at December 31, 2006.

Also included in borrowings are junior subordinated debentures payable to the Company’s unconsolidated special purpose entities (Independent Capital Trust IV (“Trust IV”) and Independent Capital Trust V (“Trust V”)) that issued trust preferred securities to the public. At December 31, 2006 there were $25.8 million outstanding junior subordinated debentures at a fixed rate of 8.375% issued by Trust IV and $51.5 million outstanding junior subordinated debentures issued by Trust V at a variable rate defined as the 3 month London Interbank Offered Rate plus 148 basis points. The Company has entered into interest rate swap agreements to fix the interest rate paid on these debentures for the next ten years at 6.52%. The debentures have a stated maturity of April 30, 2032 and March 31, 2037 for amounts due to Trust IV and V, respectively. Proceeds from the issuance of junior subordinated debentures from Trust V will be used to redeem all of the outstanding 8.375% junior subordinated debentures issued by Trust IV when they are first callable on April 30, 2007.

Investment Management, Retail Investments and Insurance

Investment Management  The Rockland Trust Investment Management Group provides investment management and trust services to individuals, small businesses, and charitable institutions throughout southeastern Massachusetts and Cape Cod. In addition, the Bank serves as executor or administrator of estates.

Accounts maintained by the Rockland Trust Investment Management Group consist of “managed” and “non-managed” accounts. “Managed” accounts are those for which the Bank is responsible for administration and investment management and/or investment advice. “Non-managed” accounts are those for which the Bank acts solely as a custodian or directed trustee. The Bank receives fees dependent upon the level and type of service(s) provided. For the year ended December 31, 2006, the Investment Management Group generated gross fee revenues of $5.5 million. Total assets under administration as of December 31, 2006, were $815.8 million, an increase of $135.7 million, or 20.0%, from December 31, 2005.

The administration of trust and fiduciary accounts is monitored by the Trust Committee of the Bank’s Board of Directors. The Trust Committee has delegated administrative responsibilities to three committees, one for

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investments, one for administration, and one for operations, all of which are comprised of Investment Management Group officers who meet not less than monthly.

Retail Investments and Insurance  In 1999, the Bank entered into an agreement with Independent Financial Marketing Group, Inc. (“IFMG”) and their insurance subsidiary IFS Agencies, Inc. (“IFS”) for the sale of mutual fund shares, unit investment trust shares, general securities, fixed and variable annuities and life insurance. At the end of June 2006, the Bank terminated its relationship with IFMG Securities and IFS Agencies and entered into agreements with Linsco/Private Ledger Corp. (“LPL”) and their insurance subsidiary Private Ledger Insurance Services of Massachusetts, Inc. to offer those services. Under the new arrangement, registered representatives who are dually employed by both the Bank and LPL are onsite to offer these products to the Bank’s customer base. In 2005, the Bank entered into an agreement with Savings Bank Life Insurance of Massachusetts (“SBLI”) to enable appropriately licensed Bank employees to offer SBLI’s fixed annuities and life insurance to the Bank’s customer base. For the year ended December 31, 2006, the retail investments and insurance group generated gross fee revenues of $593,000.

Regulation

The following discussion sets forth certain of the material elements of the regulatory framework applicable to bank holding companies and their subsidiaries and provides certain specific information relevant to the Company. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. A change in applicable statutes, regulations or regulatory policy, may have a material effect on our business. The laws and regulations governing the Company and Rockland generally have been promulgated to protect depositors and not for the purpose of protecting stockholders.

General  The Company is registered as a bank holding company under the Bank Holding Company Act of 1956 (“BHCA”), as amended, and as such is subject to regulation by the Board of Governors of the Federal Reserve System (“Federal Reserve”). Rockland is subject to regulation and examination by the Commissioner of Banks of the Commonwealth of Massachusetts (the “Commissioner”) and the Federal Deposit Insurance Corporation (“FDIC”). The majority of Rockland’s deposit accounts are insured to the maximum extent permitted by law by the Bank Insurance Fund (“BIF”) which is administered by the FDIC. In 1994, the Bank purchased the deposits of three branches of a failed savings and loan association from the Resolution Trust Corporation. These deposits are insured to the maximum extent permitted by law by the Savings Association Insurance Fund (“SAIF”).

The Bank Holding Company Act (“BHCA”)  BHCA prohibits the Company from acquiring direct or indirect ownership or control of more than 5% of any class of voting shares of any bank, or increasing such ownership or control of any bank, without prior approval of the Federal Reserve. The BHCA also prohibits the Company from, with certain exceptions, acquiring more than 5% of any class of voting shares of any company that is not a bank and from engaging in any business other than banking or managing or controlling banks.

Under the BHCA, the Federal Reserve is authorized to approve the ownership by the Company of shares in any company, the activities of which the Federal Reserve has determined to be so closely related to banking or to managing or controlling banks as to be a proper incident thereto. The Federal Reserve has, by regulation, determined that some activities are closely related to banking within the meaning of the BHCA. These activities include, but are not limited to, operating a mortgage company, finance company, credit card company, factoring company, trust company or savings association; performing data processing operations; providing some securities brokerage services; acting as an investment or financial adviser; acting as an insurance agent for types of credit-related insurance; engaging in insurance underwriting under limited circumstances; leasing personal property on a full-payout, non-operating basis; providing tax planning and preparation services; operating a collection agency and a credit bureau; providing consumer financial counseling and courier services. The Federal Reserve also has determined that other activities, including real estate brokerage and syndication, land development, property management and, except under limited circumstances, underwriting of life insurance not related to credit transactions, are not closely related to banking and are not a proper incident thereto.

Interstate Banking  Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Banking Act”), bank holding companies may acquire banks in states other than their home state

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without regard to the permissibility of such acquisitions under state law, but subject to any state requirement that the bank has been organized and operating for a minimum period of time, not to exceed five years, and the requirement that the bank holding company, after the proposed acquisition, controls no more than 10 percent of the total amount of deposits of insured depository institutions in the United States and no more than 30 percent or such lesser or greater amount set by state law of such deposits in that state.

Pursuant to Massachusetts law, no approval to acquire a banking institution, acquire additional shares in a banking institution, acquire substantially all the assets of a banking institution, or merge or consolidate with another bank holding company, may be given if the bank being acquired has been in existence for a period less than three years or, as a result, the bank holding company would control, in excess of 30%, of the total deposits of all state and federally chartered banks in Massachusetts, unless waived by the Commissioner. With the prior written approval of the Commissioner, Massachusetts also permits the establishment of de novo branches in Massachusetts to the full extent permitted by the Interstate Banking Act, provided the laws of the home state of such out-of-state bank expressly authorize, under conditions no more restrictive than those of Massachusetts, Massachusetts banks to establish and operate de novo branches in such state.

Capital Requirements  The Federal Reserve has adopted capital adequacy guidelines pursuant to which it assesses the adequacy of capital in examining and supervising a bank holding company and in analyzing applications to it under the BHCA. The Federal Reserve’s capital adequacy guidelines which generally require bank holding companies to maintain total capital equal to 8% of total risk-adjusted assets, with at least one-half of that amount consisting of Tier 1, or core capital and up to one-half of that amount consisting of Tier 2, or supplementary capital. Tier 1 capital for bank holding companies generally consists of the sum of common stockholders’ equity and perpetual preferred stock (subject in the case of the latter to limitations on the kind and amount of such stocks which may be included as Tier 1 capital), less net unrealized gains on available for sale securities and on cash flow hedges, post retirement adjustments recorded in accumulated other comprehensive income (according to an interim decision announced on December 14, 2006), and goodwill and other intangible assets required to be deducted from capital. Tier 2 capital generally consists of perpetual preferred stock which is not eligible to be included as Tier 1 capital; hybrid capital instruments such as perpetual debt and mandatory convertible debt securities, and term subordinated debt and intermediate-term preferred stock; and, subject to limitations, the allowance for loan losses. Assets are adjusted under the risk-based guidelines to take into account different risk characteristics, with the categories ranging from 0% (requiring no additional capital) for assets such as cash to 100% for the majority of assets which are typically held by a bank holding company, including commercial real estate loans, commercial loans and consumer loans. Single family residential first mortgage loans which are not 90 days or more past due or nonperforming and which have been made in accordance with prudent underwriting standards are assigned a 50% level in the risk-weighting system, as are certain privately-issued mortgage-backed securities representing indirect ownership of such loans and certain multi-family housing loans. Off-balance sheet items also are adjusted to take into account certain risk characteristics.

In addition to the risk-based capital requirements, the Federal Reserve requires bank holding companies to maintain a minimum leverage capital ratio of Tier 1 capital to total assets of 3.0%. Total assets for this purpose do not include goodwill and any other intangible assets or investments that the Federal Reserve determines should be deducted from Tier 1 capital. The Federal Reserve has announced that the 3.0% Tier 1 leverage capital ratio requirement is the minimum for the top-rated bank holding companies without any supervisory, financial or operational weaknesses or deficiencies or those which are not experiencing or anticipating significant growth. Other bank holding companies (including the Company) are expected to maintain Tier 1 leverage capital ratios of at least 4.0% to 5.0% or more, depending on their overall condition.

The Company currently is in compliance with the above-described regulatory capital requirements. At December 31, 2006, the Company had Tier 1 capital and total capital equal to 11.05% and 12.30% of total risk-adjusted assets, respectively, and Tier 1 leverage capital equal to 8.05% of total assets. As of such date, Rockland complied with the applicable bank federal regulatory risked based capital requirements, with Tier 1 capital and total capital equal to 10.42% and 11.67% of total risk-adjusted assets, respectively, and Tier 1 leverage capital equal to 7.60% of total assets.

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The FDIC has promulgated regulations and adopted a statement of policy regarding the capital adequacy of state-chartered banks, which, like Rockland, are not members of the Federal Reserve System. These requirements are substantially similar to those adopted by the Federal Reserve regarding bank holding companies, as described above. The FDIC’s capital regulations establish a minimum 3.0% Tier 1 leverage capital to total assets requirement for the most highly-rated state-chartered, non-member banks, with an additional cushion of at least 100 to 200 basis points for all other state-chartered, non-member banks, which effectively will increase the minimum Tier 1 leverage capital ratio for such banks to 4.0% or 5.0% or more. Under the FDIC’s regulations, the highest-rated banks are those that the FDIC determines are not anticipating or experiencing significant growth and have well diversified risk, including no undue interest rate risk exposure, excellent asset quality, high liquidity, good earnings and in general which are considered strong banking organizations, rated composite 1 under the Uniform Financial Institutions Rating System.

Each federal banking agency has broad powers to implement a system of prompt corrective action to resolve problems of institutions, that it regulates, which are not adequately capitalized. A bank shall be deemed to be (i) “well capitalized” if it has a total risk-based capital ratio of 10.0% or more, has a Tier 1 risk-based capital ratio of 6.0% or more, has a Tier 1 leverage capital ratio of 5.0% or more and is not subject to any written capital order or directive; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 4.0% or more, a Tier 1 leverage capital ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of “well capitalized”; (iii) “undercapitalized” if it has a total risk-based capital ratio that is less than 8.0%, or a Tier 1 risk-based capital ratio that is less than 4.0% or a Tier 1 leverage capital ratio of less than 4.0% (3.0% under certain circumstances); (iv) “significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0%, or a Tier 1 risk-based capital ratio that is less than 3.0%, or a Tier 1 leverage capital ratio that is less than 3.0%; and (v) “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. As of December 31, 2006, Rockland was deemed a “well-capitalized institution” for this purpose.

Commitments to Affiliated Institutions  Under Federal Reserve policy, the Company is expected to act as a source of financial strength to Rockland and to commit resources to support Rockland. This support may be required at times when the Company may not be able to provide such support. Similarly, under the cross-guarantee provisions of the Federal Deposit Insurance Act, in the event of a loss suffered or anticipated by the FDIC — either as a result of default of a banking or thrift subsidiary of a bank/financial holding company such as the Company or related to FDIC assistance provided to a subsidiary in danger of default — the other banking subsidiaries of such bank/financial holding company may be assessed for the FDIC’s loss, subject to certain exceptions.

Limitations on Acquisitions of Common Stock  The federal Change in Bank Control Act (“CBCA”) prohibits a person or group of persons from acquiring “control” of a bank holding company or bank unless the appropriate federal bank regulator has been given 60 days prior written notice of such proposed acquisition and within that time period such regulator has not issued a notice disapproving the proposed acquisition or extending for up to another 30 days the period during which such a disapproval may be issued. The acquisition of 25% or more of any class of voting securities constitutes the acquisition of control under the CBCA. In addition, under a rebuttal presumption established under the CBCA regulations, the acquisition of 10% or more of a class of voting stock of a bank holding company or a FDIC insured bank, with a class of securities registered under or subject to the requirements of Section 12 of the Securities Exchange Act of 1934 would, under the circumstances set forth in the presumption, constitute the acquisition of control.

Any “company” would be required to obtain the approval of the Federal Reserve under the BHCA before acquiring 25% (5% in the case of an acquirer that is a bank holding company) or more of the outstanding common stock of, or such lesser number of shares as constitute control over, the Company. Such approval would be contingent upon, among other things, the acquirer registering as a bank holding company, divesting all impermissible holdings and ceasing any activities not permissible for a bank holding company. The Company owns no voting stock in any banking institution.

Deposit Insurance Premiums  Rockland currently pays deposit insurance premiums to the FDIC based on a single, uniform assessment rate established by the FDIC for all Bank Insurance Fund (“BIF”) -member institutions. The assessment rates range from 0% to 0.27%. Under the FDIC’s risk-based assessment system, institutions are

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assigned to one of three capital groups which assignment is based solely on the level of an institution’s capital — “well capitalized,” “adequately capitalized,” and “undercapitalized” — which are defined in the same manner as the regulations establishing the prompt corrective action system under the Federal Deposit Insurance Act (“FDIA”). Rockland is presently “well capitalized” and as a result, Rockland is currently not subject to any FDIC premium obligation.

Effective January 1, 2007, the FDIC approved new deposit insurance assessment rates that will be determined based upon a combination of financial ratios and supervisory factors. There are four established risk categories under the new assessment rules. The Bank anticipates that it will qualify as a Risk Category I institution with assessment rates ranging from 5 to 7 basis points of the deposit assessment base, as defined by the FDIC. Based upon an analytic tool provided by the FDIC, the Bank anticipates that its projected calculated assessment rate will be at the lower end of that range. The Federal Deposit Insurance Reform Act of 2005 allows eligible insured depository institutions to share in a one-time assessment credit pool of approximately $4.7 billion, effectively reducing the amount these institutions will be required to submit as an overall assessment. As indicated in the final rule regarding this credit published in October 2006, the FDIC provided the Bank with a preliminary Statement of One-Time Credit. The Bank’s one-time assessment credit as indicated on that statement is approximately $1.3 million to be received in 2007.

Community Reinvestment Act (“CRA”)  Pursuant to the Community Reinvestment Act (“CRA”) and similar provisions of Massachusetts law, regulatory authorities review the performance of the Company and Rockland in meeting the credit needs of the communities served by Rockland. The applicable regulatory authorities consider compliance with this law in connection with applications for, among other things, approval of new branches, branch relocations, engaging in certain new financial activities under the Gramm-Leach-Bliley Act of 1999, as discussed below, and acquisitions of banks and bank holding companies. The FDIC and the Massachusetts Division of Banks has assigned the Bank a CRA rating of outstanding as of the latest examinations.

Bank Secrecy Act  The Bank Secrecy Act requires financial institutions to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax and regulatory matters, and to implement counter-money laundering programs and compliance procedures.

USA Patriot Act of 2001  In October 2001, the USA Patriot Act of 2001 was enacted in response to the terrorist attacks in New York, Pennsylvania and Washington D.C. which occurred on September 11, 2001. The Patriot Act is intended to strengthen U.S. law enforcement’s and the intelligence communities’ abilities to work cohesively to combat terrorism on a variety of fronts. The potential impact of the Patriot Act on financial institutions of all kinds is significant and wide ranging. The Patriot Act contains sweeping anti-money laundering and financial transparency laws and imposes various regulations, including standards for verifying client identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering.

Financial Services Modernization Legislation  In November 1999, the Gramm-Leach-Bliley Act (“GLB”) of 1999, was enacted. The GLB repeals provisions of the Glass-Steagall Act which restricted the affiliation of Federal Reserve member banks with firms “engaged principally” in specified securities activities, and which restricted officer, director or employee interlocks between a member bank and any company or person “primarily engaged” in specified securities activities.

In addition, the GLB also contains provisions that expressly preempt any state law restricting the establishment of financial affiliations, primarily related to insurance. The general effect of the law is to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms and other financial service providers, by revising and expanding the Bank Holding Company Act framework to permit a holding company to engage in a full range of financial activities through a new entity known as a “financial holding company.” “Financial activities” is broadly defined to include not only banking, insurance and securities activities, but also merchant banking and additional activities that the Federal Reserve Board, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.

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The GLB also permits national banks to engage in expanded activities through the formation of financial subsidiaries. A national bank may have a subsidiary engaged in any activity authorized for national banks directly or any financial activity, except for insurance underwriting, insurance investments, real estate investment or development, or merchant banking, which may only be conducted through a subsidiary of a financial holding company. Financial activities include all activities permitted under new sections of the Bank Holding Company Act or permitted by regulation.

To the extent that the GLB permits banks, securities firms and insurance companies to affiliate, the financial services industry may experience further consolidation. The GLB is intended to grant to community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis and which unitary savings and loan holding companies already possess. Nevertheless, the GLB may have the result of increasing the amount of competition that the Company faces from larger institutions and other types of companies offering financial products, many of which may have substantially more financial resources than the Company.

Sarbanes-Oxley Act of 2002  The Sarbanes-Oxley Act (“SOA”) of 2002 includes very specific disclosure requirements and corporate governance rules, and the Securities and Exchange Commission (“SEC”) and securities exchanges have adopted extensive disclosure, corporate governance and other related rules, due to the SOA. The Company has incurred additional expenses in complying with the provisions of the SOA and the resulting regulations. As the SEC provides any new requirements under the SOA, management will review those rules, comply as required and may incur more expenses. However, management does not expect that such compliance will have a material impact on our results of operation or financial condition.

Regulation W  Transactions between a bank and its “affiliates” are quantitatively and qualitatively restricted under the Federal Reserve Act. The Federal Deposit Insurance Act applies Sections 23A and 23B to insured nonmember banks in the same manner and to the same extent as if they were members of the Federal Reserve System. The Federal Reserve Board has also recently issued Regulation W, which codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act and interpretative guidance with respect to affiliate transactions. Regulation W incorporates the exemption from the affiliate transaction rules, but expands the exemption to cover the purchase of any type of loan or extension of credit from an affiliate. Affiliates of a bank include, among other entities, the bank’s holding company and companies that are under common control with the bank. The Company is considered to be an affiliate of the Bank. In general, subject to certain specified exemptions, a bank or its subsidiaries are limited in their ability to engage in “covered transactions” with affiliates:

•  to an amount equal to 10% of the bank’s capital and surplus, in the case of covered transactions with any one affiliate; and

•  to an amount equal to 20% of the bank’s capital and surplus, in the case of covered transactions with all affiliates.

In addition, a bank and its subsidiaries may engage in covered transactions and other specified transactions only on terms and under circumstances that are substantially the same, or at least as favorable to the bank or its subsidiary, as those prevailing at the time for comparable transactions with nonaffiliated companies. A “covered transaction” includes:

•  a loan or extension of credit to an affiliate;

•  a purchase of, or an investment in, securities issued by an affiliate;

•  a purchase of assets from an affiliate, with some exceptions;

•  the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any party; and

•  the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.

In addition, under Regulation W:

•  a bank and its subsidiaries may not purchase a low-quality asset from an affiliate;

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•  covered transactions and other specified transactions between a bank or its subsidiaries and an affiliate must be on terms and conditions that are consistent with safe and sound banking practices; and

•  with some exceptions, each loan or extension of credit by a bank to an affiliate must be secured by collateral with a market value ranging from 100% to 130%, depending on the type of collateral, of the amount of the loan or extension of credit.

Regulation W generally excludes all non-bank and non-savings association subsidiaries of banks from treatment as affiliates, except to the extent that the Federal Reserve Board decides to treat these subsidiaries as affiliates.

Employees  As of December 31, 2006, the Bank had 708 full time equivalent employees. None of the Company’s employees are represented by a labor union and management considers relations with its employees to be good.

Miscellaneous  Rockland is subject to certain restrictions on loans to the Company, on investments in the stock or securities thereof, on the taking of such stock or securities as collateral for loans to any borrower, and on the issuance of a guarantee or letter of credit on behalf of the Company. Rockland also is subject to certain restrictions on most types of transactions with the Company, requiring that the terms of such transactions be substantially equivalent to terms of similar transactions with non-affiliated firms. In addition, under state law, there are certain conditions for and restrictions on the distribution of dividends to the Company by Rockland.

The regulatory information referenced briefly summarizes certain material statutes and regulations affecting the Company and the Bank and is qualified in its entirety by reference to the particular statutory and regulatory provisions.

Statistical Disclosure by Bank Holding Companies

The following information, included under Items 6, 7, and 8 of this report are incorporated by reference herein.

Note 8, “Borrowings” within Notes to the Consolidated Financial Statements which includes information regarding short-term borrowings and is included in Item 8 hereof.

For additional information regarding the Company’s business and operations, see Selected Financial Data in Item 6 hereof, Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 hereof and the Consolidated Financial Statements in Item 8 hereof.

Securities and Exchange Commission Availability of Filings on Company Web Site

Under the Securities Exchange Act of 1934 Sections 13 and 15(d), periodic and current reports must be filed with the SEC. The public may read and copy any materials filed with the SEC at the SEC’s Office of Investor Education and Assistance (Public Reference Room) at 100 F Street, NE, Washington, DC 20549-0213. The public may obtain information on the operation of the Office of Investor Education and Assistance (Public Reference Room) by calling the SEC at 1-800-SEC-0330. The Company electronically files the following reports with the SEC: Form 10-K (Annual Report), Form 10-Q (Quarterly Report), Form 11-K (Annual Report for Employees’ Savings, Profit Sharing and Stock Ownership Plan), Form 8-K (Report of Unscheduled Material Events), Forms S-4, S-3 and 8-A (Registration Statements), and Form DEF 14A (Proxy Statement). The Company may file additional forms. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, at www.sec.gov, in which all forms filed electronically may be accessed. Additionally, our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC and additional shareholder information are available free of charge on the Company’s website: www.RocklandTrust.com (within the investor relations tab). Information contained on our website and the SEC website is not incorporated by reference into this Form 10-K. We have included our web address and the SEC website address only as inactive textual references and do not intend them to be active links to our website or the SEC website. The Company’s Code of Ethics and other Corporate Governance documents are also available on the Company’s website in the Investor Relations section of the website.

17

Item 1A.   Risk Factors

Changes in interest rates could adversely impact the Company’s financial condition and results of operations.  The Company’s ability to make a profit, like that of most financial institutions, substantially depends upon its net interest income, which is the difference between the interest income earned on interest earning assets, such as loans and investment securities, and the interest expense paid on interest-bearing liabilities, such as deposits and borrowings. However, certain assets and liabilities, may react differently to changes in market interest rates. Further, interest rates on some types of assets and liabilities may fluctuate prior to changes in broader market interest rates, while rates on other types of assets may lag behind. Additionally, some assets such as adjustable-rate mortgages, have features, and rate caps, which restrict changes in their interest rates.

Factors such as inflation, recession, unemployment, money supply, global disorder such as that experienced as a result of the terrorist activity on September 11, 2001, instability in domestic and foreign financial markets, and other factors beyond the Company’s control, may affect interest rates. Changes in market interest rates will also affect the level of voluntary prepayments on loans and the receipt of payments on mortgage-backed securities, resulting in the receipt of proceeds that may have to be reinvested at a lower rate than the loan or mortgage-backed security being prepaid. Although the Company pursues an asset-liability management strategy designed to control its risk from changes in market interest rates, changes in interest rates can still have a material adverse effect on the Company’s profitability.

If the Company has higher loan losses than it has allowed for, its earnings could materially decrease.  The Company’s loan customers may not repay loans according to their terms, and the collateral securing the payment of loans may be insufficient to assure repayment. The Company may therefore experience significant credit losses which could have a material adverse effect on its operating results. The Company makes various assumptions and judgments about the collectibility of its loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. In determining the size of the allowance for loan losses, the Company relies on its experience and its evaluation of economic conditions. If its assumptions prove to be incorrect, its current allowance for loan losses may not be sufficient to cover losses inherent in its loan portfolio and adjustment may be necessary to allow for different economic conditions or adverse developments in its loan portfolio. Consequently, a problem with one or more loans could require the Company to significantly increase the level of its provision for loan losses. In addition, federal and state regulators periodically review the Company’s allowance for loan losses and may require it to increase its provision for loan losses or recognize further loan charge-offs. Material additions to the allowance would materially decrease the Company’s net income.

A significant amount of the Company’s loans are concentrated in Massachusetts, and adverse conditions in this area could negatively impact its operations.  Substantially all of the loans the Company originates are secured by properties located in or are made to businesses which operate in Massachusetts. Because of the current concentration of the Company’s loan origination activities in Massachusetts, in the event of adverse economic conditions, potential downward pressure on housing prices, political or business developments or natural hazards that may affect Massachusetts and the ability of property owners and businesses in Massachusetts to make payments of principal and interest on the underlying loans, the Company would likely experience higher rates of loss and delinquency on its loans than if its loans were more geographically diversified, which could have an adverse effect on its results of operations or financial condition.

The Company operates in a highly regulated environment and may be adversely impacted by changes in law and regulations.  The Company is subject to extensive regulation, supervision and examination. See “Regulation” in Item 1 hereof, Business.  Any change in the laws or regulations and failure by the Company to comply with applicable law and regulation, or a change in regulators’ supervisory policies or examination procedures, whether by the Massachusetts Commissioner of Banks, the FDIC, the Federal Reserve Board, other state or federal regulators, the United States Congress, or the Massachusetts legislature could have a material adverse effect on the Company’s business, financial condition, results of operations, and cash flows.

The Company has strong competition within its market area which may limit the Company’s growth and profitability.  The Company faces significant competition both in attracting deposits and in the origination of loans. See “Market Area and Competition” in Item 1 hereof, Business.  Commercial banks, credit unions, savings

18

banks, savings and loan associations operating in our primary market area have historically provided most of our competition for deposits. Competition for the origination of real estate and other loans come from other commercial banks, thrift institutions, insurance companies, finance companies, other institutional lenders and mortgage companies.

The success of the Company is dependent on hiring and retaining certain key personnel.  The Company’s performance is largely dependent on the talents and efforts of highly skilled individuals. The Company relies on key personnel to manage and operate its business, including major revenue generating functions such as loan and deposit generation. The loss of key staff may adversely affect the Company’s ability to maintain and manage these functions effectively, which could negatively affect the Company’s revenues. In addition, loss of key personnel could result in increased recruiting and hiring expenses, which could cause a decrease in the Company’s net income. The Company’s continued ability to compete effectively depends on its ability to attract new employees and to retain and motivate its existing employees.

Item 1B.   Unresolved Staff Comments

None

Item 2.   Properties

At December 31, 2006, the Bank conducted its business from its headquarters and main office located at 288 Union Street, Rockland, Massachusetts and fifty-one banking offices located within Barnstable, Bristol, Norfolk and Plymouth Counties in Southeastern Massachusetts and Cape Cod. In addition to its main office, the Bank owned twenty-one of its branches and leased the remaining thirty branches. All of the Bank’s properties are considered to be in good condition and adequate for the purpose for which they are used. In addition to these branch locations, the Bank had three remote ATM locations all of which were leased.

	Banking
County	Offices		ATM		Deposits
					(Dollars in thousands)
Barnstable		15		—	$	541,327
Bristol		3		—		78,381
Norfolk		5		—		175,098
Plymouth		29		3		1,295,538
Total		52		3	$	2,090,344

The Bank conducted business in nine additional administrative locations. These locations housed executive, administrative, investment management, mortgage lending, consumer lending, commercial lending and back office support staff and warehouse space. The bank owned three of its administrative offices and leased the remaining six offices.

County	Administrative Offices
Barnstable		1
Bristol		2
Norfolk		1
Plymouth		5
Total		9

For additional information regarding our premises and equipment and lease obligations, see Notes 6 and 16, respectively, to the Consolidated Financial Statements included in Item 8 hereof.

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Item 3.   Legal Proceedings

The Company expects that the federal judge presiding over the pending case known as Rockland Trust Company v. Computer Associates International, Inc., United States District Court for the District of Massachusetts Civil Action No. 95-11683-DPW, will issue a final trial court decision, in the form of Findings Of Fact and Conclusions Of Law, sometime soon. The case arises from a 1991 License Agreement (the “Agreement”) between the Bank and Computer Associates International, Inc. (“CA”) for an integrated system of banking software products.

In July 1995 the Bank filed a Complaint against CA in federal court in Boston which asserted claims for breach of the Agreement, breach of express warranty, breach of the implied covenant of good faith and fair dealing, fraud, and for unfair and deceptive practices in violation of section 11 of Chapter 93A of the Massachusetts General Laws (the “93A Claim”). The Bank is seeking damages of at least $1.23 million from CA. If the Bank prevails on the 93A Claim, it shall be entitled to recover its attorney fees and costs and may also recover double or triple damages. CA asserted a Counterclaim against the Bank for breach of the Agreement. CA seeks to recover damages of at least $1.1 million from the Bank.

The non-jury trial of the case was conducted in January 2001. The trial concluded with post-trial submissions to and argument before the court in February 2001. The court has not yet rendered a decision.

The Company has considered the potential impact of this case, and all cases pending in the normal course of business, when preparing its financial statements. While the trial court decision may affect the Company’s operating results for the quarter in which the decision is rendered in either a favorable or unfavorable manner, the final outcome of this case will not likely have any material, long-term impact on the Company’s financial condition.

In addition to the foregoing, the Company is involved in routine legal proceedings occurring in the ordinary course of business which in the aggregate are believed by us to be immaterial to our financial condition and results of operations.

Item 4.   Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of our security holders in the fourth quarter of 2006.

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PART II

Item 5.   Market for Independent Bank Corp.’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a.) Independent Bank Corp.’s common stock trades on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”) under the symbol INDB. The Company declared cash dividends of $0.64 per share in 2006 and $0.60 per share in 2005. The ratio of dividends paid to earnings in 2006 and 2005 was 29.1% and 27.8%, respectively.

Payment of dividends by the Company on its common stock is subject to various regulatory restrictions and guidelines. Since substantially all of the funds available for the payment of dividends are derived from the Bank, future dividends will depend on the earnings of the Bank, its financial condition, its need for funds, applicable governmental policies and regulations, and other such matters as the Board of Directors deem appropriate. Management believes that the Bank will continue to generate adequate earnings to continue to pay dividends on a quarterly basis.

The following schedule summarizes the closing price range of common stock and the cash dividends paid for the fiscal years 2006 and 2005.

Table 1 — Price Range of Common Stock

2006	High		Low		Dividend
4th Quarter	$	36.91	$	31.60	$	0.16
3rd Quarter		34.59		31.34		0.16
2nd Quarter		32.98		29.91		0.16
1st Quarter		32.33		28.52		0.16

2005	High		Low		Dividend
4th Quarter	$	30.20	$	26.98	$	0.15
3rd Quarter		31.53		28.20		0.15
2nd Quarter		29.52		25.31		0.15
1st Quarter		33.20		28.34		0.15

As of December 31, 2006 there were 14,686,481 shares of common stock outstanding which were held by approximately 1,268 holders of record. The closing price of the Company’s stock on December 29, 2006 (the last trading day of calendar year 2006) was $36.03. The number of record holders may not reflect the number of persons or entities holding stock in nominee name through banks, brokerage firms and other nominees.

The information required by S-K Item 201 (d) is incorporated by reference from Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters hereof.

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Comparative Stock Performance Graph

The stock performance graph below and associated table compare the cumulative total shareholder return of the Company’s common stock from December 31, 2001 to December 31, 2006 with the cumulative total return of the NASDAQ Market Index (U.S. Companies) and the NASDAQ Bank Stock Index. The lines in the graph and the numbers in the table below represent monthly index levels derived from compounded daily returns that include reinvestment or retention of all dividends. If the monthly interval, based on the fiscal year end was not a trading day, the preceding trading day was used. The index value for all of the series was set to 100.00 on December 31, 2001 (which assumes that $100.00 was invested in each of the series on December 31, 2001).

Independent Bank Corp.

Total Return Performance

	Period Ending
Index	12/31/01		12/31/02		12/31/03		12/31/04		12/31/05		12/31/06
Independent Bank Corp.		100.00		108.33		137.35		166.87		144.07		185.57
NASDAQ Composite		100.00		68.76		103.67		113.16		115.57		127.58
SNL NASDAQ Bank Index		100.00		102.85		132.76		152.16		147.52		165.62

Source: SNL Financial LC, Charlottesville, VA

^© 2007

On January 19, 2006 the Company’s Board of Directors approved a common stock repurchase program. Under the program, which was effective immediately, the Company was authorized to repurchase up to 800,000 shares, or approximately 5% of the Company’s outstanding common stock. During the quarter ended September 30, 2006, the Company completed its repurchase plan with a total of 800,000 shares of common stock repurchased at a weighted average share price of $31.04. Additional information about the repurchase program is set forth in Part II, Item 5(c.) hereof.

On December 14, 2006, the Company’s Board of Directors approved another common stock repurchase program. Under the program, which was effective immediately, the Company is authorized to repurchase up to 1,000,000 shares, or approximately 7% of the Company’s outstanding common stock. The Company placed no

22

deadline on the repurchase program, but expects to make open market or privately negotiated purchases from time to time. The timing and amount of stock repurchases will depend upon market conditions, securities law limitations, and other corporate considerations. The repurchase program may be modified, suspended, or terminated by the Board of Directors at any time.

(b.) Not applicable

(c.) The following table sets forth information with respect to any purchase made by or on behalf of Independent Bank Corp. or any “affiliated purchaser,” as defined in 204.10b-18(a)(3) under the Securities Exchange Act of 1934, of shares of Independent Bank Corp. common stock during the indicated periods:

Table 2 — Issuer Purchases of Equity Securities

					Total Number of Shares		Maximum Number of
			Weighted		Purchased as Part of		Shares That May Yet be
	Total Number of		Average Price Paid		Publicly Announced Plans		Purchased Under the
Period	Shares Purchased		per Share		or Programs		Plans or Programs(1)
January 1st — 31st, 2006		43,700	$	29.56		43,700		756,300
February 1st — 28th, 2006		81,500	$	29.42		81,500		674,800
March 1st — 31st, 2006		68,100	$	30.67		68,100		606,700
April 1st — 30th, 2006		196,450	$	31.30		196,450		410,250
May 1st — May 31st, 2006		160,286	$	31.63		160,286		249,964
June 1st — June 30th, 2006		161,800	$	31.07		161,800		88,164
July 1st — July 31st, 2006		75,000	$	31.62		75,000		13,164
August 1st — August 31st, 2006		13,164	$	33.09		13,164		—
September 1st — September 30th, 2006		—		—		—		—
October 1st — October 31st, 2006		—		—		—		—
November 1st — November 30th, 2006		—		—		—		—
December 1st — December 31st, 2006		—		—		—		1,000,000
Total		800,000	$	31.04		800,000		1,000,000

(1) On January 19, 2006, the Company announced a common stock repurchase program to repurchase up to 800,000 shares. On December 14, 2006, the Company announced another common stock repurchase program to repurchase up to 1,000,000 shares. The Company placed no deadline on the repurchase programs. There were no shares purchased other than through a publicly announced plan or program.

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Item 6.   Selected Financial Data

The selected consolidated financial and other data of the Company set forth below does not purport to be complete and should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including the Consolidated Financial Statements and related notes, appearing elsewhere herein.

	As of or For the Years Ended December 31,
	2006			2005			2004			2003			2002
	(Dollars in thousands, except per share data)
FINANCIAL CONDITION DATA:
Securities available for sale	$	417,088		$	581,516		$	680,286		$	527,507		$	501,828
Securities held to maturity		76,747			104,268			107,967			121,894			149,071
Loans		2,024,909			2,040,808			1,916,358			1,581,135			1,431,602
Allowance for loan losses		26,815			26,639			25,197			23,163			21,387
Total assets		2,828,919			3,041,685			2,943,926			2,436,755			2,285,372
Total deposits		2,090,344			2,205,494			2,060,235			1,783,338			1,688,732
Total borrowings(1)		493,649			587,810			655,161			415,369			362,155
Corporation-obligated manditorily redeemable Trust Preferred Securities(1)		—			—			—			47,857			47,774
Stockholders’ equity		229,783			228,152			210,743			171,847			161,242
Non-performing loans		6,979			3,339			2,702			3,514			3,077
Non-performing assets		7,169			3,339			2,702			3,514			3,077
OPERATING DATA:
Interest income	$	167,693		$	155,661		$	134,613		$	128,306		$	140,825
Interest expense(1)		65,038			49,818			36,797			32,533			40,794
Net interest income		102,655			105,843			97,816			95,773			100,031
Provision for loan losses		2,335			4,175			3,018			3,420			4,650
Non-interest income		26,644			27,273			28,355			27,794			22,644
Non-interest expenses		79,354			80,615			77,691			73,827			75,625
Minority interest expense(1)		—			—			1,072			4,353			5,041
Net income		32,851			33,205			30,767			26,431			25,066
Net income available to common shareholders		32,851			33,205			30,767			26,431			23,561
PER SHARE DATA:
Net income — Basic	$	2.20		$	2.16		$	2.06		$	1.82		$	1.63
Net income — Diluted		2.17			2.14			2.03			1.79			1.61
Cash dividends declared		0.64			0.60			0.56			0.52			0.48
Book value(2)		15.65			14.81			13.75			11.75			11.15
Tangible book value per share(3)		11.80			11.12			10.01			9.27			8.64
OPERATING RATIOS:
Return on average assets(4)		1.12	%		1.11	%		1.13	%		1.11	%		1.12	%
Return on average equity(4)		14.60	%		15.10	%		16.27	%		15.89	%		17.26	%
Net interest margin (on a fully tax equivalent basis)		3.85	%		3.88	%		3.95	%		4.40	%		4.88	%
Equity to assets		8.12	%		7.50	%		7.16	%		7.05	%		7.06	%
Dividend payout ratio		29.10	%		27.79	%		27.23	%		28.64	%		27.67	%

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	As of or For the Years Ended December 31,
	2006			2005			2004			2003			2002
	(Dollars in thousands, except per share data)
ASSET QUALITY RATIOS:
Non-performing loans as a percent of gross loans		0.34	%		0.16	%		0.14	%		0.22	%		0.21	%
Non-performing assets as a percent of total assets		0.25	%		0.11	%		0.09	%		0.14	%		0.13	%
Allowance for loan losses as a percent of total loans		1.32	%		1.31	%		1.31	%		1.46	%		1.49	%
Allowance for loan losses as a percent of non-performing loans		384.22	%		797.81	%		932.53	%		659.16	%		695.06	%
Total allowance for loan losses as a percent of total loans(5)		1.32	%		1.31	%		1.31	%		1.46	%		1.53	%
Total allowance for loan losses as a percent of non-performing loans(5)		384.22	%		797.81	%		932.53	%		659.16	%		711.89	%
CAPITAL RATIOS:
Tier 1 leverage capital ratio		8.05	%		7.71	%		7.06	%		7.60	%		7.10	%
Tier 1 risk-based capital ratio		11.05	%		10.74	%		10.19	%		11.00	%		10.37	%
Total risk-based capital ratio		12.30	%		11.99	%		11.44	%		12.25	%		11.68	%

(1)	Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46 Revised, “Consolidation of Variable Interest Entities — an Interpretation of Accounting Research Bulletin No. 51” (“FIN 46R”) required the Company to deconsolidate its two subsidiary trusts (Independent Capital Trust III and Independent Capital Trust IV) on March 31, 2004. The result of deconsolidating these subsidiary trusts is that trust preferred securities of the trusts, which were classified between liabilities and equity on the balance sheet (mezzanine section), no longer appear on the consolidated balance sheet of the Company. The related minority interest expense also is no longer included in the consolidated statement of income. Due to FIN 46R, the junior subordinated debentures of the parent company that were previously eliminated in consolidation are now included on the consolidated balance sheet within total borrowings. The interest expense on the junior subordinated debentures is included in the calculation of net interest margin of the consolidated company, negatively impacting the net interest margin by approximately 0.13% for the twelve months ending December 31, 2004 on an annualized basis and 0.16% for the fiscal years to follow. There is no impact on net income as the amount of interest previously recognized as minority interest is equal to the amount of interest expense that is recognized currently in the net interest margin offset by the dividend income on the subsidiary trusts common stock recognized in other non-interest income.
(2)	Calculated by dividing total stockholders’ equity by the net outstanding shares as of the end of each period.
(3)	Calculated by dividing stockholders’ equity less goodwill and core deposit intangible by the net outstanding shares as of the end of each period.
(4)	Calculated using net income which excludes the after-tax write-off of trust preferred issuance costs in 2002.
(5)	Including credit quality discount for the year 2002.

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Independent Bank Corp. (the “Company”) is a state chartered, federally registered bank holding company headquartered in Rockland, Massachusetts incorporated in 1985. The Company is the sole stockholder of Rockland Trust Company (“Rockland” or “the Bank”), a Massachusetts trust company chartered in 1907. During 2006 the Company was also the sponsor of Delaware statutory trusts named Independent Capital Trust III (“Trust III”), Independent Capital Trust IV (“Trust IV”), and Independent Capital Trust V (“Trust V”), which were each formed to issue trust preferred securities. Trust III was dissolved on December 31, 2006 and the Company intends to

25

dissolve Trust IV on April 30, 2007 upon the redemption of all of the outstanding trust preferred securities of Trust IV on that date. Trust III, Trust IV, and Trust V are not included in the Company’s consolidated financial statements (see Note 8, “Borrowings” within Notes to the Consolidated Financial Statements hereof).

As of December 31, 2006 the Bank had the following corporate subsidiaries, all of which were wholly-owned by the Bank and were included in the Company’s consolidated financial statements:

•  Four Massachusetts security corporations, namely Rockland Borrowing Collateral Securities Corp., Rockland IMG Collateral Securities Corp., Rockland Deposit Collateral Securities Corp., and Taunton Avenue Securities Corp., which hold securities, loans, industrial development bonds and other qualifying assets, and;

•  Rockland Trust Community Development Corporation (the “Parent CDE”) which, in turn, has two wholly-owned corporate subsidiaries named Rockland Trust Community Development LLC (“RTC CDE I”) and Rockland Trust Community Development Corporation II (“RTC CDE II”). The Parent CDE, CDE I, and CDE II were all formed to qualify as community development entities under federal New Markets Tax Credit Program criteria.

During 2006 the Bank also had wholly-owned subsidiaries named RTC Securities Corp., RTC Securities Corp. X, and Taunton Avenue Inc. that were dissolved prior to the end of 2006.

All material intercompany balances and transactions have been eliminated in consolidation. When necessary, certain amounts in prior year financial statements have been reclassified to conform to the current year’s presentation. The following should be read in conjunction with the Consolidated Financial Statements and related notes thereto.

Executive Level Overview

The Company’s results of operations are largely dependent on net interest income, which is the difference between the interest earned on loans and securities and interest paid on deposits and borrowings. The results of operations are also affected by fee income derived from loans, deposits, mortgage banking, and investment management activities, as well as operating expenses, the provision for loan losses, the impact of federal and state income taxes, and the relative levels of interest rates and economic activity.

The Company reported earnings of $32.9 million for 2006 representing a decrease of $354,000, or 1.1%, from 2005. Net interest income in 2006 decreased from 2005 by $3.2 million, and included a $995,000 charge associated with the write-off of unamortized debt issuance costs from the refinancing of trust preferred securities. Growth in fee income arising from deposit service charges and investment management along with a reduction in the provision for loan losses served to largely offset the decrease in net interest income and modest growth in non-interest expense categories.

2006 represented a continuation and acceleration of management’s strategy to alter the overall composition of the Company’s earning assets. Since mid 2004 the Company has focused on commercial and home equity lending, while de-emphasizing securities purchases, residential real estate portfolio lending, and indirect auto lending. This asset focus, combined with prudent decision-making in the prevailing interest rate environment, has led the Company to shrink its balance sheet, while changing the overall structure of the Company’s assets and liabilities. Over the last two years the Company’s securities portfolio has aggressively decreased by $300.9 million (now 19.8% of earning assets, whereas at December 31, 2004 they were 29.9%), consumer auto loans have decreased by $77.1 million (10.2% of loans now, whereas at December 31, 2004 they were 14.8%) and residential real estate loans have decreased by $48.3 million. The decreases in these three asset categories represent an overall decrease of $426.3 million in earning assets over the last two years, most of which was in 2006, a decrease which has been partially offset by growth in the commercial and home equity loan categories.

26

The following graph depicts the historical U.S. Treasury yield curve as of December 31, for the years 2004 — 2006.

Historical U.S. Treasury Yield Curve

A yield curve is a graphic line chart that shows interest rates at a specific point for all securities having equal risk, but different maturity dates.¹ A flat yield curve is one in which there is little difference between short-term and long-term rates for bonds of the same credit quality. When short- and long-term bonds are offering equivalent yields, there is usually little benefit in holding the longer-term instruments — that is, the investor does not gain any excess compensation for the risks associated with holding longer-term securities. For example, a flat yield curve on U.S. Treasury Securities would be one in which the yield on a two-year bond is 5% and the yield on a 30-year bond is 5.1%.²

The following pie charts depict the continuing shift in the composition of earning assets by type as a percent of total earning assets for the time periods indicated below:

Earning Asset Profile

Deposits decreased in 2006 by $115.2 million, or 5.2%, particularly in the more expensive deposit categories. Management remains committed to generating core deposits with careful management of deposit pricing and

¹ The Free Dictionary.com

²  Investopedia.com

27

selective deposit promotion in an effort to control the Company’s cost of funds. Competition for deposit generation in the Company’s geographic footprint, however, is expected to remain strong.

While changes in the prevailing interest rate environment (See Historical U.S. Treasury Yield Curve graph above) have and will continue to have an impact on the level of the Company’s earnings, management strives to mitigate volatility in net interest income resulting from changes in benchmark interest rates by adjustable rate asset generation, effective liability management, and utilization of off-balance sheet interest rate derivatives. (For a discussion of interest rate derivatives and interest rate sensitivity see the Asset/Liability section and Market Risk section and Table 19 — “Interest Rate Sensitivity” within the Market Risk section of the Management Discussion and Analysis of Financial Condition and Results of Operations). The following table shows the Company’s net interest margin stability during a period of increasing rates since mid 2004. Management is focused on maintaining this net interest margin performance and expects a range of 3.80% to 3.90% in 2007.

Net Interest Margin (FTE) December 2006

Non-performing assets increased at December 31, 2006 to $7.2 million, or 0.25%, of total assets, as compared to $3.3 million, or 0.11%, of total assets at December 31, 2005. While non-performing assets increased from historically low levels, the Company considers non-performing assets balances well within acceptable parameters. The Company’s allowance for loan losses has increased to 132 basis points at December 31, 2006 from 131 basis points at December 31, 2005 and 2004. Net charge-offs remained low at 11 basis points of average loans, as compared to 14 basis points in 2005.

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The following graph depicts the Company’s non-performing assets and the ratio of non-performing assets as a percentage of assets at the periods indicated:

Non-Performance Assets
(Dollars in Millions)

The Company’s significant accomplishments during 2006 included:

•  Being honored by the United States Treasury, for the second time, with an award of tax credit allocation authority under the federal New Markets Tax Credit program. The Company’s community development subsidiary was the only Massachusetts-based bank subsidiary to receive a New Markets Tax Credit award in 2006, a year in which only fourteen bank subsidiaries nationwide were so honored. The $45 million award enables the Company’s community development subsidiary to offer loans on preferential terms and conditions to qualified businesses in low income communities in Southeastern Massachusetts and Rhode Island and the Company to begin recognizing the associated $17.6 million in tax credits over a 7 year period;

•  Opening a new commercial banking office in New Bedford, Massachusetts, staffed by two new seasoned bankers from that market;

•  Enhancing fee income generation and deposit-gathering capabilities by signing an agreement to acquire the assets of Compass Exchange Advisors LLC. At the January 2, 2007 closing of that transaction the Company established a wholly-owned subsidiary to offer qualified intermediary, like-kind exchange services pursuant to Internal Revenue Code §1031 to corporate, institutional, and individual property owners;

•  Strengthening sales capabilities by adding six net new experienced commercial bankers across the Bank;

•  Introducing Savings Bank Life Insurance products;

•  Increasing assets under management in our Investment Management Group to over $815 million — a 20% increase from the end of 2005 — and increasing revenues.

During 2006 the Company also continued to manage capital in a disciplined and prudent manner, as evidenced by:

•  Completing a common stock repurchase program with the buy-back of 800,000 common shares of stock at a weighted average share price of $31.04;

•  Beginning another common stock repurchase program for the repurchase of up to 1.0 million common shares of stock;

•  Refinancing the Company’s Trust Preferred Securities commencing late in the fourth quarter of 2006 and to be completed in the second quarter of 2007, saving approximately $1.0 million in interest expense, on an annualized basis, beginning in 2007; and,

•  Increasing the annual dividend to $0.64 per share, a 6.7% increase.

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Management’s balance sheet strategy in 2007 will again emphasize commercial and home equity lending while continuing the themes of 2005 and 2006 — prudent earning asset and liability management and disciplined use of shareholder capital. Management is focused on the long-term and in maintaining our strong profitability performance as measured by return on average assets (“ROA”) and return on average equity (“ROE”). The Company reported ROA and ROE in 2006 of 1.12% and 14.6%, respectively. Management expects ROA and ROE performance in 2007 to be approximately 1.10% and 13-14%, respectively.

The Company is well positioned as 2007 begins. Management anticipates, however, that the interest rate environment will make 2007 another challenging year for the entire banking industry.

Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that our most critical accounting policies upon which our financial condition depends, and which involve the most complex or subjective decisions or assessments are as follows:

Allowance for Loan Losses:  The Company’s allowance for loan losses provides for probable losses based upon evaluations of known and inherent risks in the loan portfolio. Arriving at an appropriate amount of allowance for loan losses involves a high degree of judgment.

The Company makes use of two types of allowances for loan losses: specific and general. A specific allowance may be assigned to a loan that is considered to be impaired. Loan impairment is determined based upon management’s identification and evaluation of problem loans and is recognized when the Company deems that the timely collection of all principal and/or interest payments that are contractually due is no longer assured. Judgment is required as to the timing of designating a loan as impaired and the amount of the required specific allowance. Management’s judgment is based upon its assessment of probability of default, loss given default and exposure at default. Changes in these estimates could be due to a number of circumstances which may have a direct impact on the provision for loan losses and may result in changes to the amount of allowance.

The general allowance is determined based upon management’s judgment and its amount is dependent upon the prevailing business environment; as it is affected by changing economic conditions and various external factors, which may impact the portfolio in ways currently unforeseen, as well as historical and expected loss information, loan portfolio composition and other relevant indicators. The allowance is increased by provisions for loan losses and by recoveries of loans previously charged-off and is reduced by loans charged-off. For a full discussion of the Company’s methodology of assessing the adequacy of the allowance for loan losses, see the Allowance for Loan Losses and Provision for Loan Losses sections within the Management’s Discussion and Analysis of Financial Condition and Results of Operations to follow.

Income Taxes:  The Company estimates income tax expense based on the amount it expects to owe various tax authorities. Taxes are discussed in more detail in Note 11, “Income Taxes” within Notes to the Consolidated Financial Statements included in Item 8 hereof. Accrued taxes represent the net estimated amount due to or to be received from taxing authorities in the current year. In estimating accrued taxes, management assesses the relative merits and risks of the appropriate tax treatment of transactions taking into account statutory, judicial and regulatory guidance in the context of our tax position. Deferred tax assets/liabilities represent differences between when a tax benefit or expense is recognized for book purposes and on the Company’s tax return. Future tax assets are assessed for recoverability. The Company would record a valuation allowance if it believes based on available evidence, that it is more likely than not that the future tax assets recognized will not be realized before their expiration. The amount of the future income tax asset recognized and considered realizable could be reduced if projected income is not achieved due to various factors such as unfavorable business conditions. If projected income is not expected to be achieved, the Company would record a valuation allowance to reduce its future tax assets to the amount that it believes can be realized in its future tax returns. The Company has no recorded tax valuation allowance as of December 31, 2006. Additionally, deferred tax assets/liabilities are calculated based on tax rates expected to be in effect in future periods. Previously recorded tax assets and liabilities need to be adjusted when the expected date of the future event is revised based upon current information.

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Valuation of Goodwill/Intangible Assets and Analysis for Impairment:   Independent Bank Corp. in part has increased its market share through the acquisition of entire financial institutions accounted for under the purchase method of accounting, as well as from the acquisition of branches (not the entire institution) and other non-banking entities. For acquisitions accounted for under the purchase method and the acquisition of branches, the Company is required to record assets acquired and liabilities assumed at their fair value which is an estimate determined by the use of internal or other valuation techniques. These valuation estimates result in goodwill and other intangible assets. Goodwill is subject to ongoing periodic impairment tests and is evaluated using various fair value techniques including multiples of price/equity and price/earnings ratios. As a result of such impairment testing conducted in 2006 the Company determined goodwill was not impaired.

Financial Position

The Company’s total assets decreased by $212.8 million, or 7.0%, from $3.0 billion at December 31, 2005 to $2.8 billion at December 31, 2006. Total average assets were $2.9 billion and $3.0 billion in 2006 and 2005, respectively. These decreases are due to intentional decreases in the Company’s securities portfolio and certain loan categories due to a combination of the flat yield curve environment and the profitability characteristics of these asset classes. Total securities of $517.3 million, at December 31, 2006, decreased $199.3 million compared to the $716.6 million reported on December 31, 2005 due to the yield curve environment that persisted throughout 2006. Total loans of $2.0 billion, at December 31, 2006 decreased $15.9 million compared to the prior year ended December 31, 2005. Total deposits decreased by $115.2 million, or 5.2%, due to certain expensive deposit categories, such as money market, which were intentionally decreased in accordance with the funding needs of a smaller balance sheet. Total borrowings decreased by $94.2 million, or 16.0%, as excess cash flow from the securities portfolio and certain loan categories were used to decrease wholesale borrowings. Stockholders’ equity increased by $1.6 million in 2006. The increase was due to net income of $32.9 million, proceeds from stock option exercises of $1.3 million, a net decrease in unrealized losses on securities of $2.6 million, offset by stock repurchases of $24.8 million, dividends declared of $9.5 million, and the net decrease in the fair value of derivatives of $909,000. During 2004, the Company completed the acquisition of Falmouth Bancorp, Inc., parent of Falmouth Co-Operative Bank (“Falmouth”) resulting in total assets acquired of $158.4 million, total liabilities assumed of $141.6 million, or $16.8 million of net assets.

Loan Portfolio  Management continues to focus on changing the overall composition of the balance sheet by emphasizing the commercial and home equity lending categories while placing less emphasis on indirect auto lending, portfolio residential lending, and the securities portfolio. While changing the overall structure of the Company’s assets and liabilities has led to a smaller balance sheet and has slowed earnings growth, management believes it is prudent in the current interest rate environment. At December 31, 2006, the Bank’s loan portfolio amounted to $2.0 billion, a decrease of $15.9 million, or 0.8%, from year-end 2005. This decrease was primarily in the categories of consumer auto, which decreased $56.3 million, or 21.4%, and residential real estate which decreased in total by $44.2 million, or 10.0%. These intentional decreases were offset by growth mainly in the emphasized lending segments of commercial real estate loans which increased $57.3 million, or 8.4%, and consumer home equity loans which increased $25.2 million, or 10.0%. Commercial and industrial loans and business banking loans also experienced growth of $19.3 million, or 12.4%, and $8.5 million, or 16.6%, respectively, while the consumer other lending category decreased $4.7 million, or 8.7%, and commercial construction loans decreased $21.0 million, or 14.9%.

In accordance with governing banking statutes, Rockland is permitted, with certain exceptions, to make loans and commitments to any one borrower, including related entities, in the aggregate amount of not more than 20% of the Bank’s stockholders’ equity, which is the “Bank’s legal lending limit” or $53.3 million at December 31, 2006. Notwithstanding the foregoing, the Bank has established a more restrictive limit of not more than 75% of the Bank’s legal lending limit, or $40.0 million at December 31, 2006, which may only be exceeded with the approval of the Board of Directors. There were no borrowers whose total indebtedness in aggregate exceeded $40.0 million as of December 31, 2006.

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The following table sets forth information concerning the composition of the Bank’s loan portfolio by loan type at the dates indicated.

Table 3 — Loan Portfolio Composition

	At December 31,
	2006					2005					2004					2003					2002
	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent
	(Dollars in thousands)
Commercial and Industrial	$	174,356		8.6	%	$	155,081		7.6	%	$	156,260		8.2	%	$	161,675		10.2	%	$	143,074		10.0	%
Commercial Real Estate		740,517		36.5	%		683,240		33.5	%		613,300		32.0	%		564,890		35.7	%		511,102		35.7	%
Commercial Construction		119,685		5.9	%		140,643		6.9	%		126,632		6.6	%		75,380		4.8	%		49,113		3.4	%
Business Banking		59,910		3.0	%		51,373		2.5	%		43,673		2.3	%		27,807		1.8	%		22,717		1.6	%
Residential Real Estate		378,368		18.7	%		428,343		21.0	%		427,556		22.3	%		324,052		20.5	%		281,452		19.7	%
Residential Construction		7,277		0.4	%		8,316		0.4	%		7,316		0.4	%		9,633		0.6	%		10,258		0.7	%
Residential Loans Held for Sale(1)		11,859		0.6	%		5,021		0.2	%		10,933		0.6	%		1,471		0.1	%		—		0.0	%
Consumer — Home Equity		277,015		13.7	%		251,852		12.4	%		194,647		10.2	%		132,629		8.4	%		109,122		7.6	%
Consumer — Auto		206,845		10.2	%		263,179		12.9	%		283,964		14.8	%		240,504		15.2	%		265,690		18.6	%
Consumer — Other		49,077		2.4	%		53,760		2.6	%		52,077		2.7	%		43,094		2.7	%		39,074		2.7	%
Gross Loans		2,024,909		100.0	%		2,040,808		100.0	%		1,916,358		100.0	%		1,581,135		100.0	%		1,431,602		100.0	%
Allowance for Loan Losses		26,815					26,639					25,197					23,163					21,387
Net Loans	$	1,998,094				$	2,014,169				$	1,891,161				$	1,557,972				$	1,410,215

(1) 2002 Residential Loans Held for Sale are classified within Residential Real Estate.

At December 31, 2006, $174.4 million, or 8.6%, of the Bank’s gross loan portfolio consisted of commercial and industrial loans, compared to $155.1 million, or 7.6%, at December 31, 2005. The Bank’s commercial revolving lines of credit generally are for the purpose of providing working capital to borrowers and may be secured or unsecured. At December 31, 2006, the Bank had $94.6 million outstanding under commercial revolving lines of credit compared to $81.9 million at December 31, 2005, and $151.6 million of unused commitments under such lines at December 31, 2006 compared to $160.2 million in the prior year. As of December 31, 2006, the Bank had $8.3 million in outstanding commitments pursuant to commercial and standby letters of credit compared to $8.9 million at December 31, 2005. Floor plan loans, which are included in commercial and industrial loans, and are secured by the automobiles, boats, or other vehicles constituting the dealer’s inventory, amounted to $14.1 million as of December 31, 2006 compared to $14.2 million at the prior year-end.

The Company’s business banking initiative caters to the banking needs of businesses with commercial credit needs of less than $250,000 and revenues of less than $2.5 million. Business banking loans totaled $59.9 million, representing 3.0%, of the total loan portfolio during the year ended December 31, 2006, compared to $51.4 million, or 2.5% at December 31, 2005. The Bank had unused business lines of credit of $36.1 million at December 31, 2006 compared to $35.3 million at December 31, 2005.

Total real estate loans of $1.3 billion comprised 62.1% of gross loans at December 31, 2006, which is consistent with the $1.3 billion, or 62.0%, of gross loans at December 31, 2005, however the composition of real estate loans has changed. The Bank’s real estate loan portfolio included $740.5 million in commercial real estate loans at December 31, 2006. This category reflected increases over last year of $57.3 million, or 8.4%. Commercial construction loans of $119.7 million decreased by $21.0 million, or 14.9%, compared to year-end 2005. Residential real estate loans, including residential construction and residential loans held for sale, which were $7.3 million and $11.9 million, respectively, at year-end 2006, decreased $44.2 million, or 10.0%, in 2006.

Consumer loans primarily consist of automobile, home equity, and other consumer loans. As of December 31, 2006, $532.9 million, or 26.3%, of the Bank’s gross loan portfolio, consisted of consumer loans compared to $568.8 million, or 27.9%, of the Bank’s gross loans at December 31, 2005. Home equity loans may be made as a term loan or under a revolving line of credit secured by a first or second mortgage on the borrower’s residence. Consumer home equity loans were $277.0 million, at December 31, 2006, an increase of $25.2 million, or 10.0%,

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since December 31, 2005 and represented 52.0% of the total consumer loan portfolio. As of December 31, 2006, there were $213.7 million in unused commitments under revolving home equity lines of credit compared to $199.3 million at December 31, 2005. As of December 31, 2006 and 2005, automobile loans were $206.8 million, representing 38.8%, and $263.2 million, representing 46.3%, respectively, of the Bank’s consumer loan portfolio. As of December 31, 2006, other consumer loans amounted to $49.1 million compared to $53.8 million as of December 31, 2005. These loans largely consisted of loans secured by recreational vehicles, motor homes, boats, mobile homes, and motorcycles and cash reserve loans. Cash reserve loans are designed to afford the Bank’s customers overdraft protection. Cash reserve loans are made pursuant to previously approved unsecured cash reserve lines of credit and the rate on these loans is subject to change due to market conditions. As of December 31, 2006 and 2005, $19.0 million and $19.5 million, respectively, had been committed but was unused under cash reserve lines of credit.

The following table sets forth the scheduled contractual amortization of the Bank’s loan portfolio at December 31, 2006. Loans having no schedule of repayments or no stated maturity are reported as due in one year or less. Adjustable rate mortgages are included in the adjustable rate category. The following table also sets forth the rate structure of loans scheduled to mature after one year.

Table 4 — Scheduled Contractual Loan Amortization At December 31, 2006

			Commercial						Residential				Residential		Consumer
			Real		Commercial		Business		Real		Residential		Held for		Home		Consumer		Consumer
	Commercial		Estate		Construction		Banking		Estate		Construction		Sale		Equity		Auto		Other		Total
	(Dollars in thousands)
Amounts due in:
One year or less	$	122,365	$	114,093	$	67,610	$	40,332	$	14,812	$	7,277	$	11,859	$	6,017	$	64,335	$	14,939	$	463,639
After one year through five years		47,164		471,588		47,373		18,534		64,551		—		—		24,782		139,495		18,071		831,558
Beyond five years		4,827		154,836		4,702		1,044		299,005		—		—		246,216		3,015		16,067		729,712
Total	$	174,356	$	740,517	$	119,685	$	59,910	$	378,368	$	7,277	$	11,859	$	277,015	$	206,845	$	49,077	$	2,024,909
Interest rate terms on amounts due after one year:
Fixed Rate	$	35,773	$	563,536	$	21,477	$	19,578	$	123,114	$	—	$	—	$	74,971	$	142,510	$	34,138	$	1,015,097
Adjustable Rate		16,218		62,888		30,598		—		240,442		—		—		196,027		—		—		546,173

As of December 31, 2006, $204,000 of loans scheduled to mature within one year were nonperforming.

Generally, the actual maturity of loans is substantially shorter than their contractual maturity due to prepayments and, in the case of real estate loans, due-on-sale clauses, which generally gives the Bank the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells the property subject to the mortgage and the loan is not repaid. The average life of real estate loans tends to increase when current real estate loan rates are higher than rates on mortgages in the portfolio and, conversely, tends to decrease when rates on mortgages in the portfolio are higher than current real estate loan rates. Under the latter scenario, the weighted average yield on the portfolio tends to decrease as higher yielding loans are repaid or refinanced at lower rates. Due to the fact that the Bank may, consistent with industry practice, “roll over” a significant portion of commercial and commercial real estate loans at or immediately prior to their maturity by renewing the loans on substantially similar or revised terms, the principal repayments actually received by the Bank are anticipated to be significantly less than the amounts contractually due in any particular period. In addition, a loan, or a portion of a loan, may not be repaid due to the borrower’s inability to satisfy the contractual obligations of the loan.

Residential mortgage loans originated for sale are classified as held for sale. These loans are specifically identified and carried at the lower of aggregate cost or estimated market value. Forward commitments to sell residential real estate mortgages are contracts that the Bank enters into for the purpose of reducing the market risk associated with originating loans for sale should interest rates change. Forward commitments to sell as well as commitments to originate rate-locked loans intended for sale are recorded at fair value.

During 2006 and 2005, the Bank originated residential loans with the intention of selling these loans in the secondary market. Loans are sold both with servicing rights released and servicing rights retained. Loans originated

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and sold with servicing rights released were $160.9 million and $171.3 million in 2006 and 2005, respectively. Loans originated and sold with servicing rights retained were $8.0 million and $20.1 million in 2006 and 2005, respectively.

The principal balance of loans serviced by the Bank on behalf of investors amounted to $292.9 million at December 31, 2006 and $336.5 million at December 31, 2005. The fair value of the servicing rights associated with these loans was $2.4 million and $2.9 million as of December 31, 2006 and 2005, respectively.

Asset Quality  Rockland Trust Company actively manages all delinquent loans in accordance with formally drafted policies and established procedures. In addition, Rockland Trust Company’s Board of Directors reviews delinquency statistics, by loan type, on a monthly basis.

Delinquency  The Bank’s philosophy toward managing its loan portfolios is predicated upon careful monitoring which stresses early detection and response to delinquent and default situations. The Bank seeks to make arrangements to resolve any delinquent or default situation over the shortest possible time frame. Generally, the Bank requires that a delinquency notice be mailed to a borrower upon expiration of a grace period (typically no longer than 15 days beyond the due date). Reminder notices and telephone calls may be issued prior to the expiration of the grace period. If the delinquent status is not resolved within a reasonable time frame following the mailing of a delinquency notice, the Bank’s personnel charged with managing its loan portfolios, contacts the borrower to ascertain the reasons for delinquency and the prospects for payment. Any subsequent actions taken to resolve the delinquency will depend upon the nature of the loan and the length of time that the loan has been delinquent. The borrower’s needs are considered as much as reasonably possible without jeopardizing the Bank’s position. A late charge is usually assessed on loans upon expiration of the grace period.

On loans secured by one-to-four family, owner-occupied properties, the Bank attempts to work out an alternative payment schedule with the borrower in order to avoid foreclosure action. If such efforts do not result in a satisfactory arrangement, the loan is referred to legal counsel whereupon counsel initiates foreclosure proceedings. At any time prior to a sale of the property at foreclosure, the Bank may and will terminate foreclosure proceedings if the borrower is able to work out a satisfactory payment plan. On loans secured by commercial real estate or other business assets, the Bank similarly seeks to reach a satisfactory payment plan so as to avoid foreclosure or liquidation.

The following table sets forth a summary of certain delinquency information as of the dates indicated:

Table 5 — Summary of Delinquency Information

	At December 31, 2006								At December 31, 2005
	60-89 days				90 days or more				60-89 days				90 days or more
	Number		Principal		Number		Principal		Number		Principal		Number		Principal
	of Loans		Balance		of Loans		Balance		of Loans		Balance		of Loans		Balance
	(Dollars in thousands)
Commercial and Industrial		6	$	1,173		6	$	528		2	$	24		4	$	209
Commercial Real Estate		1		104		3		538		3		2,892		2		288
Commercial Construction		—		—		—		—		—		—		—		—
Business Banking		3		86		6		74		5		97		3		47
Residential Real Estate		4		621		3		1,409		4		1,337		2		373
Residential Construction		—		—		—		—		—		—		—		—
Consumer — Home Equity		1		16		7		345		—		—		—		—
Consumer — Auto		68		553		62		676		65		597		61		572
Consumer — Other		11		67		23		199		18		112		17		110
Total		94	$	2,620		110	$	3,769		97	$	5,059		89	$	1,599

Delinquencies have increased in the 90 day category year over year mainly due to residential real estate and consumer home equity loans, all of which the Company believes to be well collateralized.

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Nonaccrual Loans  As permitted by banking regulations, consumer loans and home equity loans past due 90 days or more continue to accrue interest. In addition, certain commercial and real estate loans that are more than 90 days past due may be kept on an accruing status if the loan is well secured and in the process of collection. As a general rule, a commercial or real estate loan more than 90 days past due with respect to principal or interest is classified as a nonaccrual loan. Income accruals are suspended on all nonaccrual loans and all previously accrued and uncollected interest is reversed against current income. A loan remains on nonaccrual status until it becomes current with respect to principal and interest (and in certain instances remains current for up to three months), when the loan is liquidated, or when the loan is determined to be uncollectible it is charged-off against the allowance for loan losses.

Nonperforming Assets  Nonperforming assets are comprised of nonperforming loans, nonperforming securities and Other Real Estate Owned (“OREO”). Nonperforming loans consist of loans that are more than 90 days past due but still accruing interest and nonaccrual loans. OREO includes properties held by the Bank as a result of foreclosure or by acceptance of a deed in lieu of foreclosure. As of December 31, 2006, nonperforming assets totaled $7.2 million, an increase of $3.8 million from the prior year-end. The overall increase in nonperforming assets is attributable mainly to increases in nonperforming loans shown in the commercial mortgage loan category and, to a lesser extent, in the term loan, residential mortgage and home equity loan categories. Nonperforming assets represented 0.25% of total assets for the year ending December 31, 2006 and 0.11% for the year ending December 31, 2005. The Bank had one property held as OREO for both periods ending December 31, 2006 and December 31, 2005.

Repossessed automobile loan balances continue to be classified as nonperforming loans, and not as other assets, because the borrower has the potential to satisfy the obligation within twenty days from the date of repossession (before the Bank can schedule disposal of the collateral). The borrower can redeem the property by payment in full at any time prior to the disposal of it by the Bank. Repossessed automobile loan balances amounted to $451,000 and $509,000 for the periods ending December 31, 2006, and December 31, 2005, respectively.

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The following table sets forth information regarding nonperforming assets held by the Bank at the dates indicated.

Table 6 — Nonperforming Assets

	At December 31,
	2006			2005			2004			2003			2002
	(Dollars in thousands)
Loans past due 90 days or more but still accruing
Consumer — Home Equity	$	—		$	—		$	—		$	—		$	—
Consumer — Auto		252			165			72			128			220
Consumer — Other		137			62			173			28			41
Total	$	389		$	227		$	245		$	156		$	261
Loans accounted for on a nonaccrual basis(1)
Commercial and Industrial	$	872		$	245		$	334		$	971		$	300
Business Banking(2)		74			47			N/A			N/A			N/A
Commercial Real Estate		2,346			313			227			691			1,320
Residential Real Estate		2,318			1,876			1,193			926			533
Consumer — Home Equity		358			—			—			—			—
Consumer — Auto		451			509			594			714			656
Consumer — Other		171			122			109			56			7
Total	$	6,590		$	3,112		$	2,457		$	3,358		$	2,816
Total nonperforming loans	$	6,979		$	3,339		$	2,702		$	3,514		$	3,077
Other real estate owned		190			—			—			—			—
Total nonperforming assets	$	7,169		$	3,339		$	2,702		$	3,514		$	3,077
Restructured loans	$	—		$	377		$	416		$	453		$	497
Nonperforming loans as a percent of gross loans		0.34	%		0.16	%		0.14	%		0.22	%		0.21	%
Nonperforming assets as a percent of total assets		0.25	%		0.11	%		0.09	%		0.14	%		0.13	%

(1)	There were no restructured, nonaccruing loans at December 31, 2006, 2005, 2004, 2003 and 2002.
(2)	For the periods prior to December 31, 2005, Business Banking loans are included in Commercial and Industrial and Consumer — Other.

In the course of resolving nonperforming loans, the Bank may choose to restructure the contractual terms of certain commercial and real estate loans. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status. It is the Bank’s policy to maintain restructured loans on nonaccrual status for approximately six months before management considers its return to accrual status. At December 31, 2006 the Bank had no restructured loans and at December 31, 2005 the Bank had $377,000 of restructured loans.

Potential problem loans are any loans, which are not included in non-accrual or non-performing loans and which are not considered troubled debt restructures, where known information about possible credit problems of the borrowers causes management to have concerns as to the ability of such borrowers to comply with present loan repayment terms. At December 31, 2006 and 2005, the Bank had fifteen and nine potential problem loan relationships, respectively, which are not included in nonperforming loans with an outstanding balance of $21.8 million and $30.3 million, respectively. At December 31, 2006, these potential problem loans continued to perform and are generally well-collateralized. The Company’s management actively monitors these loans and strives to minimize any possible adverse impact to the Bank.

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Real estate acquired by the Bank through foreclosure proceedings or the acceptance of a deed in lieu of foreclosure is classified as OREO. When property is acquired, it is recorded at the lesser of the loan’s remaining principal balance or the estimated fair value of the property acquired, less estimated costs to sell. Any loan balance in excess of the estimated fair value less estimated cost to sell on the date of transfer is charged to the allowance for loan losses on that date. All costs incurred thereafter in maintaining the property, as well as subsequent declines in fair value are charged to non-interest expense.

Interest income that would have been recognized for the years ended December 31, 2006, 2005 and 2004, if nonperforming loans at the respective dates had been performing in accordance with their original terms approximated $146,000, $282,000, and $312,000, respectively. The actual amount of interest that was collected on these nonaccrual and restructured loans during each of those periods and included in interest income was approximately $225,000, $103,000, and $140,000, respectively.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan by loan basis for commercial, commercial real estate, and construction loans, and selectively, for certain consumer, residential or home equity loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Large groups of homogeneous loans are collectively evaluated for impairment. As such, the Bank does not typically identify individual loans within these groupings for impairment evaluation and disclosure.

At December 31, 2006, impaired loans include all commercial real estate loans and commercial and industrial loans on nonaccrual status and certain potential problem loans. Total impaired loans at December 31, 2006 and 2005 were $3.6 million and $935,000, respectively.

Allowance for Loan Losses  While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on increases in nonperforming loans, changes in economic conditions, or for other reasons. Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Federal Reserve regulators examined the Company in the third quarter of 2004 and the Bank was most recently examined by the Federal Deposit Insurance Corporation (“FDIC”) in the second quarter of 2006. No additional provision for loan losses was required as a result of these examinations.

The allowance for loan losses is maintained at a level that management considers adequate to provide for probable loan losses based upon evaluation of known and inherent risks in the loan portfolio. The allowance is increased by provisions for loan losses and by recoveries of loans previously charged-off and reduced by loans charged-off.

The Bank’s total allowance for loan losses as of December 31, 2006 was $26.8 million, or 1.32%, of total loans as compared to $26.6 million, or 1.31%, of total loans at December 31, 2005.

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The following table summarizes changes in the allowance for loan losses and other selected statistics for the periods presented:

Table 7 — Summary of Changes in the Allowance for Loan Losses

	Year Ending December 31,
	2006			2005			2004			2003			2002
	(Dollars in thousands)
Average total loans	$	2,041,098		$	1,987,591		$	1,743,844		$	1,512,997		$	1,345,720
Allowance for loan losses, beginning of year	$	26,639		$	25,197		$	23,163		$	21,387		$	18,190
Charged-off loans:
Commercial and Industrial		185			120			181			195			134
Business Banking(1)		401			505			N/A			N/A			N/A
Commercial Real Estate		—			—			—			—			—
Residential Real Estate		—			—			—			—			—
Commercial Construction		—			—			—			—			—
Residential Construction		—			—			—			—			—
Consumer — Home Equity		—			—			—			—			—
Consumer — Auto		1,713			1,772			2,089			1,938			1,958
Consumer — Other		881			1,077			329			196			373
Total charged-off loans		3,180			3,474			2,599			2,329			2,465
Recoveries on loans previously charged-off:
Commercial and Industrial		219			85			214			283			628
Business Banking(1)		92			14			N/A			N/A			N/A
Commercial Real Estate		1			128			2			2			2
Residential Real Estate		—			—			30			—			—
Commercial Construction		—			—			—			—			—
Residential Construction		—			—			—			—			—
Consumer — Home Equity		—			20			—			—			—
Consumer — Auto		516			350			372			321			286
Consumer — Other		193			144			127			79			96
Total recoveries		1,021			741			745			685			1,012
Net loans charged-off		2,159			2,733			1,854			1,644			1,453
Allowance related to business combinations		—			—			870			—			—
Provision for loan losses		2,335			4,175			3,018			3,420			4,650
Allowance for loan losses, end of period	$	26,815		$	26,639		$	25,197		$	23,163		$	21,387
Credit quality discount on acquired loans(2)		—			—			—			—			518
Total allowances for loan losses, end of year	$	26,815		$	26,639		$	25,197		$	23,163		$	21,905
Net loans charged-off as a percent of average total loans		0.11	%		0.14	%		0.11	%		0.11	%		0.11	%
Allowance for loan losses as a percent of total loans		1.32	%		1.31	%		1.31	%		1.46	%		1.49	%
Allowance for loan losses as a percent of nonperforming loans		384.22	%		797.81	%		932.53	%		659.16	%		695.06	%
Total allowance for loan losses as a percent of total loans (including credit quality discount)		1.32	%		1.31	%		1.31	%		1.46	%		1.53	%
Total allowance for loan losses as a percent of nonperforming loans (including credit quality discount)		384.22	%		797.81	%		932.53	%		659.16	%		711.89	%
Net loans charged-off as a percent of allowance for loan losses		8.05	%		10.26	%		7.36	%		7.10	%		6.79	%
Recoveries as a percent of charge-offs		32.11	%		21.33	%		28.66	%		29.41	%		41.05	%

(1)	For periods prior to December 31, 2005, Business Banking loans are included in Commercial and Industrial and Consumer-Other.
(2)	The Bank established a separate credit quality discount in 2000 as a reduction of the loan balances acquired from Fleet Boston Financial. The credit quality discount was fully utilized by 2003.

The allowance for loan losses is allocated to various loan categories as part of the Bank’s process of evaluating the adequacy of the allowance for loan losses. Allocated allowances increased by approximately $1.2 million to

38

$25.4 million at December 31, 2006. Increased amounts of allowance were allocated to four major loan categories: commercial real estate, commercial & industrial, business banking, and home equity. The increased amounts allocated to these loan categories represented substantially all of the increase in the allocated allowance amounts, as compared to December 31, 2005. Decreases in the allocation of allowances were posted in real estate construction, residential real estate, consumer auto, and other consumer loan categories, due mainly to reductions in these loan balances as compared to the end of 2005.

The increase of 15.3% in the amount of allowance allocated to the commercial and industrial category is mainly attributed to growth within this portfolio, which increased 12.4% from the end of 2005. Additionally, changes to the categorization of risk for certain loan balances, combined with portfolio turnover, also contributed to the increase in the amount of allowance allocation. Specifically, loan balances within certain commercial and industrial loan groupings that have been repaid have been replaced by newly originated loan balances that require different levels of allocated allowance based upon the ascertainable risk characteristics of those loans.

The increase in the amount of allowance allocated to the commercial real estate category is due to loan balance growth within this loan category attributed to new loan origination, and risk rating changes of certain loan balances. Loan balances outstanding in this portfolio, at December 31, 2006, increased by 8.4%, while the amount of allowance allocated to this portfolio grew by 13.7%, as compared to December 31, 2005. The amount of allowance allocated reflects increases in loan balances distributed among certain loan types within commercial real estate that require different levels of allocated allowance based upon the ascertainable risk characteristics of those loans.

The increase in the amount of allowance allocated to the consumer — home equity portfolio is due to growth in this loan portfolio attributed to new loan origination, combined with the identification of one loan where a specific allocation amount was established. Outstanding balances at December 31, 2006 grew by 10.0% as compared to the amount shown at December 31, 2005, while the corresponding amount of allowance allocated increased by 35.6% as compared to December 31, 2005.

The increase in the amount of allowance allocated to the business banking portfolio component resulted from a 16.6% increase in loan balances as compared to December 31, 2005.

The decrease in the amount of allowance allocated to the real estate construction portfolio is due to loan balance reductions within this portfolio attributed to the slowdown in the residential housing market in the Bank’s market area, combined with risk rating changes of certain loan balances. Loan balances outstanding in this portfolio component, at December 31, 2006, decreased by 14.8%, while the corresponding amount of allowance allocated decreased by 14.9%, as compared to December 31, 2005. The amount of allowance allocated within the real estate construction portfolio reflects the reallocation of certain loan balances distributed among loan groupings within this portfolio that require different levels of allocated allowance based upon the ascertainable risk characteristics of those loans.

The decrease in the amount of allowance allocated to the residential real estate category of 12.9% reflects a corresponding 10.0% decrease in loan balances from December 31, 2005 to December 31, 2006.

The decrease in the amount of allowance allocated to the consumer auto loan category of 21.4% reflects a 21.4% decrease in loan balances, from December 31, 2005 to December 31, 2006.

The decrease in the amount of allowance allocated to the consumer-other loan portfolio reflects an 8.7% reduction in loan balances as compared to December 31, 2005. Consumer-other is comprised of other consumer loan product types including non-auto installment loans, overdraft lines and other credit line facilities.

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The following table summarizes the allocation of the allowance for loan losses for the years indicated:

Table 8 — Summary of Allocation of Allowance for Loan Losses

	At December 31,
	2006					2005					2004					2003					2002
			Percent of					Percent of					Percent of					Percent of							Percent of
			Loans					Loans					Loans					Loans					Credit		Loans
	Allowance		In Category			Allowance		In Category			Allowance		In Category			Allowance		In Category			Allowance		Quality		In Category
	Amount		To Total Loans			Amount		To Total Loans			Amount		To Total Loans			Amount		To Total Loans			Amount		Discount		To Total Loans
	(Dollars in thousands)
Allocated Allowance:
Commercial and Industrial	$	3,615		8.6	%	$	3,134		7.6	%	$	3,387		8.2	%	$	4,653		10.8	%	$	3,435	$	10		10.6	%
Business Banking(1)		1,340		3.0	%		1,193		2.5	%		1,022		2.3	%		N/A		N/A			N/A		N/A		N/A
Commercial Real Estate		13,136		36.5	%		11,554		33.5	%		10,346		32.0	%		9,604		35.7	%		7,906		419		35.7	%
Real Estate Construction		2,955		6.3	%		3,474		7.3	%		2,905		7.0	%		1,389		5.4	%		1,196		—		4.1	%
Residential Real Estate		566		19.3	%		650		21.2	%		659		22.9	%		488		20.6	%		422		—		19.7	%
Consumer — Home Equity		1,024		13.7	%		755		12.4	%		583		10.1	%		398		8.4	%		304		63		7.6	%
Consumer — Auto		2,066		10.2	%		2,629		12.9	%		2,839		14.8	%		2,399		15.2	%		2,623		22		18.6	%
Consumer — Other		652		2.4	%		757		2.6	%		667		2.7	%		1,244		3.9	%		1,073		4		3.7	%
Imprecision Allowance		1,461		N/A			2,493		N/A			2,789		N/A			2,988		N/A			4,428		—		N/A
Total Allowance for Loan Losses	$	26,815		100.0	%	$	26,639		100.0	%	$	25,197		100.0	%	$	23,163		100.0	%	$	21,387	$	518		100.0	%

(1) For the periods prior to December 31, 2004, Business Banking loans are included in Commercial and Industrial and Consumer — Other.

Allocated amounts of allowance for loan losses are determined using both a formula-based approach applied to groups of loans and an analysis of certain individual loans for impairment.

The formula-based approach evaluates groups of loans to determine the allocation appropriate within each portfolio section. Individual loans within the commercial and industrial, commercial real estate and real estate construction loan portfolio sections are assigned internal risk ratings to group them with other loans possessing similar risk characteristics. The level of allowance allocable to each group of risk-rated loans is then determined by management applying a loss factor that estimates the amount of probable loss inherent in each category. The assigned loss factor for each risk rating is a formula-based assessment of historical loss data, portfolio characteristics, economic trends, overall market conditions, past experience and management’s analysis of considerations of probable loan loss based on these factors.

During the quarter ended March 31, 2005, enhancements to the Bank’s internal risk-rating framework were implemented. These enhancements refine the definitional detail of the risk attributes and characteristics that compose each risk grouping and add granularity to the assessment of credit risk across those defined risk groupings.

Allocations for business banking, residential real estate and other consumer loan categories are principally determined by applying loss factors that represent management’s estimate of probable or expected losses inherent in those categories. In each section, inherent losses are estimated, based on a formula-based assessment of historical loss data, portfolio characteristics, economic trends, overall market conditions, past loan loss experience and management’s considerations of probable loan loss based on these factors.

The other method used to allocate allowances for loan losses entails the assignment of allowance amounts to individual loans on the basis of loan impairment. Certain loans are evaluated individually and are judged to be impaired when management believes it is probable that the Bank will not collect all of the contractual interest and principal payments as scheduled in the loan agreement. Under this method, loans are selected for evaluation based upon a change in internal risk rating, occurrence of delinquency, loan classification or non-accrual status. A specific allowance amount is allocated to an individual loan when such loan has been deemed impaired and when the amount of a probable loss is able to be estimated on the basis of: (a) the present value of anticipated future cash flows or on the loan’s observable fair market value, or (b) the fair value of collateral if the loan is collateral dependent. Loans with a specific allowance and the amount of such allowance totaled $3.6 million and $414,000, respectively, at December 31, 2006 and $558,000 and $1,000, respectively, at December 31, 2005. In addition, at

40

December 31, 2006, there were $1.2 million of residential real estate and home equity loans that were evaluated individually for which a specific allowance of $194,000 has been assigned.

A portion of the allowance for loan loss is not allocated to any specific section of the loan portfolio. This non-specific allowance is maintained for two primary reasons: (a.) there exists an inherent subjectivity and imprecision to the analytical processes employed, and (b.) the prevailing business environment, as it is affected by changing economic conditions and various external factors, may impact the portfolio in ways currently unforeseen. Moreover, management has identified certain risk factors which could impact the degree of loss sustained within the portfolio. These include: (a.) market risk factors, such as the effects of economic variability on the entire portfolio, and (b.) unique portfolio risk factors that are inherent characteristics of the Bank’s loan portfolio. Market risk factors may consist of changes to general economic and business conditions that may impact the Bank’s loan portfolio customer base in terms of ability to repay and that may result in changes in value of underlying collateral. Unique portfolio risk factors may include industry concentration or covariant industry concentrations, geographic concentrations or trends that may exacerbate losses resulting from economic events which the Bank may not be able to fully diversify out of its portfolio.

Due to the imprecise nature of the loan loss estimation process and ever changing conditions, these risk attributes may not be adequately captured in data related to the formula-based loan loss components used to determine allocations in the Bank’s analysis of the adequacy of the allowance for loan losses. Management, therefore, has established and maintains an imprecision allowance for loan losses reflecting the uncertainty of future economic conditions within the Bank’s market area. The amount of this measurement imprecision allocation was $1.5 million at December 31, 2006, a decrease of $1.0 million, or 40.0%, compared to the $2.5 million at December 31, 2005.

Management has deemed the current measurement imprecision level adequate based on a careful analysis of national and local economic conditions. The national and state economy exhibited positive growth in 2006, tempered by weakness in the housing market. Advance annual 2006 Gross Domestic Product (“GDP”) growth outpaced the 2005 level, as consumer spending remained robust due to the stabilization of energy prices, continued job growth, and higher income levels. Additionally, inflation remained in check during the year. Reliable indicators showed positive economic growth for Massachusetts in every month of 2006. Increases in exports, fueled by strong demand for the state’s technology and science-based goods, helped improve local labor markets and workers’ income in the state during 2006. Locally, the core inflation rate in the Boston area was lower than the national level for 2006. Additionally, leading indicators suggest continued economic growth in 2007.

As of December 31, 2006, the allowance for loan losses totaled $26.8 million as compared to $26.6 million at December 31, 2005. Based on the processes described above, management believes that the level of the allowance for possible loan losses at December 31, 2006 is adequate.

Securities Portfolio  The Company’s securities portfolio consists of trading assets, securities available for sale, securities which management intends to hold until maturity, and Federal Home Loan Bank (“FHLB”) stock. Equity securities which are held for the purpose of funding Rabbi Trust obligations (see Note 13 “Employee Benefits” of the Notes to Consolidated Financial Statements in Item 8 hereof) are classified as trading assets. Trading assets are recorded at fair value with changes in fair value recorded in earnings. Trading assets were $1.8 million at December 31, 2006 and $1.6 million at December 31, 2005.

Securities which management intends to hold until maturity consist of mortgage-backed securities, state, county and municipal securities and corporate debt securities. Securities held to maturity as of December 31, 2006 are carried at their amortized cost of $76.7 million and exclude gross unrealized gains of $1.3 million and no gross unrealized losses. A year earlier, securities held to maturity totaled $104.3 million excluding gross unrealized gains of $2.7 million and gross unrealized losses of $230,000.

Securities available for sale consist of certain U.S. Treasury and U.S. Government agency obligations, mortgage-backed securities, collateralized mortgage obligations, and state, county and municipal securities. These securities are carried at fair value and unrealized gains and losses, net of applicable income taxes, are recognized as a separate component of stockholders’ equity. The fair value of securities available for sale at December 31, 2006 totaled $417.1 million, including the associated pre-tax net unrealized loss totaling $10.0 million. A year earlier,

41

securities available for sale were $581.5 million including a pre-tax net unrealized loss of $14.4 million. In 2006 and 2005, the Company recognized $3.2 million of net losses and $616,000 of net gains, respectively, on the sale of available for sale securities. Lower coupon securities were sold in 2006 as part of a gradual de-leveraging strategy designed to improve the Bank’s mix of earning assets and net interest margin.

The following table sets forth the amortized cost and percentage distribution of securities held to maturity at the dates indicated.

Table 9 — Amortized Cost of Securities Held to Maturity

	At December 31,
	2006					2005					2004
	Amount		Percent			Amount		Percent			Amount		Percent
	(Dollars in thousands)
Mortgage-Backed Securities	$	5,526		7.2	%	$	6,936		6.7	%	$	8,971		8.3	%
State, County and Municipal Securities		35,046		45.7	%		41,628		39.9	%		43,084		39.9	%
Corporate Debt Securities		36,175		47.1	%		55,704		53.4	%		55,912		51.8	%
Total	$	76,747		100.0	%	$	104,268		100.0	%	$	107,967		100.0	%

The following table sets forth the fair value and percentage distribution of securities available for sale at the dates indicated.

Table 10 — Fair Value of Securities Available for Sale

	At December 31,
	2006					2005					2004
	Amount		Percent			Amount		Percent			Amount		Percent
	(Dollars in thousands)
U.S. Treasury and U.S. Government Agency Securities	$	87,853		21.1	%	$	151,253		26.0	%	$	140,356		20.6	%
Mortgage-Backed Securities		212,996		51.1	%		257,532		44.3	%		349,716		51.4	%
Collateralized Mortgage Obligations		88,898		21.3	%		150,322		25.8	%		170,661		25.1	%
State, County and Municipal Securities		18,816		4.5	%		22,409		3.9	%		19,553		2.9	%
Corporate Debt Securities		8,525		2.0	%		—		0.0	%		—		0.0	%
Total	$	417,088		100.0	%	$	581,516		100.0	%	$	680,286		100.0	%

The following two tables set forth contractual maturities of the Bank’s securities portfolio at December 31, 2006. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Table 11 — Amortized Cost of Securities Held to Maturity
Amounts Maturing

	Within					Weighted			One Year					Weighted			Five					Weighted								Weighted								Weighted
	One		% of			Average			to Five		% of			Average			Years to		% of			Average			Over Ten		% of			Average					% of			Average
	Year		Total			Yield			Years		Total			Yield			Ten Years		Total			Yield			Years		Total			Yield			Total		Total			Yield
	(Dollars in thousands)
Mortgage Backed Securities	$	—		0.0	%		—		$	—		0.0	%		—		$	1,524		2.0	%		5.5	%	$	4,002		5.2	%		5.5	%	$	5,526		7.2	%		5.5	%
State, County and Municipal Securities		38		0.0	%		5.0	%		2,892		3.8	%		4.0	%		13,760		17.9	%		4.4	%		18,356		23.9	%		5.0	%		35,046		45.7	%		4.7	%
Corporate Debt Securities		—		0.0	%		0.0	%		—		0.0	%		—			—		0.0	%		—			36,175		47.1	%		8.0	%		36,175		47.1	%		8.0	%
Total	$	38		0.0	%		5.0	%	$	2,892		3.8	%		4.0	%	$	15,284		19.9	%		4.5	%	$	58,533		76.3	%		6.9	%	$	76,747		100.0	%		6.3	%

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Table 12 — Fair Value of Securities Available for Sale
Amounts Maturing

									One								Five
	Within					Weighted			Year to					Weighted			Years to					Weighted								Weighted								Weighted
	One		% of			Average			Five		% of			Average			Ten		%			Average			Over Ten		% of			Average					% of			Average
	Year		Total			Yield			Years		Total			Yield			Years		of Total			Yield			Years		Total			Yield			Total		Total			Yield
	(Dollars in thousands)
U.S. Treasury and U.S. Government Agency Securities	$	19,706		4.7	%		3.5	%	$	68,147		16.3	%		3.4	%	$	—		0.0	%		0.0	%	$	—		0.0	%		0.0	%	$	87,853		21.1	%		3.5	%
Mortgage Backed Securities		—		0.0	%		0.0	%		104		0.0	%		8.0	%		62,684		15.0	%		4.6	%		150,208		36.0	%		4.8	%		212,996		51.1	%		4.8	%
Collateralized Mortgage Obligations		—		0.0	%		0.0	%		—		0.0	%		0.0	%		22,793		5.5	%		4.4	%		66,105		15.8	%		4.3	%		88,898		21.3	%		4.4	%
State, County and Municipal Securities		—		0.0	%		0.0	%		18,816		4.5	%		4.6	%		—		0.0	%		0.0	%		—		0.0	%		0.0	%		18,816		4.4	%		4.6	%
Corporate Debt Securities		—		0.0	%		0.0	%		—		0.0	%		0.0	%		—		0.0	%		0.0	%		8,525		2.0	%		6.8	%		8,525		1.9	%		6.8	%
Total	$	19,706		4.7	%		3.5	%	$	87,067		20.9	%		3.7	%	$	85,477		20.5	%		4.5	%	$	224,838		54.0	%		4.7	%	$	417,088		100.0	%		4.4	%

At December 31, 2006 and 2005, the Bank had no investments in obligations of individual states, counties or municipalities which exceeded 10% of stockholders’ equity. In addition, there were no sales of state, county or municipal securities in 2006 or 2005.

Bank Owned Life Insurance  In 1998, the Bank purchased $30.0 million of Bank Owned Life Insurance (“BOLI”). The Bank purchased these policies for the purpose of offsetting the Bank’s future obligations to its employees under its retirement and benefit plans. During 2003, certain split dollar life policies with shared ownership between the Bank and certain executives were reassigned in total to the Bank in response to new legislation that considers any payments by a company to a split dollar life policy to be a prohibited loan (see Note 13 “Employee Benefits” of the Notes to Consolidated Financial Statements in Item 8 hereof). The original insurance policies totaling $1.4 million are now included within the Bank’s BOLI portfolio and will be used by the Company to fund future obligations to its employees under its retirement and benefits plans. The value of BOLI was $45.8 million and $44.8 million at December 31, 2006 and 2005, respectively. The Bank recorded income from BOLI of $3.3 million in 2006, $1.8 million in 2005, and $1.9 million in 2004, respectively. In the first quarter of 2006 the Company recognized a tax exempt gain of $1.3 million for a death benefit received on a former employee who was covered under the BOLI program.

Deposits  As of December 31, 2006, deposits of $2.1 billion were $115.2 million, or 5.2%, lower than the prior year-end. Core deposits decreased by $153.2 million, or 9.1%.

The following table sets forth the average balances of the Bank’s deposits for the periods indicated.

Table 13 — Average Balances of Deposits

	2006					2005					2004
	Amount		Percent			Amount		Percent			Amount		Percent
	(Dollars in thousands)
Demand Deposits	$	495,958		23.1	%	$	514,611		24.0	%	$	478,073		24.1	%
Savings and Interest Checking		563,615		26.3	%		599,797		28.0	%		570,661		28.8	%
Money Market		524,265		24.4	%		519,461		24.2	%		456,970		23.0	%
Time Certificates of Deposits		563,212		26.2	%		510,611		23.8	%		478,037		24.1	%
Total	$	2,147,050		100.0	%	$	2,144,480		100.0	%	$	1,983,741		100.0	%

43

The Bank’s time certificates of deposit of $100,000 or more totaled $179.2 million at December 31, 2006. The maturity of these certificates is as follows:

Table 14 — Maturities of Time Certificate of Deposits Over $100,000

	Balance		Percentage
	(Dollars in thousands)
1 to 3 months	$	65,523		36.6	%
4 to 6 months		75,062		41.9	%
7 to 12 months		32,309		18.0	%
Over 12 months		6,260		3.5	%
Total	$	179,154		100.0	%

Borrowings  The Bank’s borrowings amounted to $493.6 million at December 31, 2006, a decrease of $94.2 million from year-end 2005. At December 31, 2006, the Bank’s borrowings consisted primarily of FHLB borrowings totaling $305.1 million, a decrease of $112.3 million from the prior year-end. The decrease in these borrowings occurred as excess cash flow from the securities portfolio and certain loan categories was used to decrease wholesale borrowing.

The remaining borrowings consisted of federal funds purchased, assets sold under repurchase agreements, junior subordinated debentures and treasury tax and loan notes. These borrowings totaled $188.5 million at December 31, 2006, an increase of $18.2 million from the prior year-end. See Note 8 “Borrowings” of the Notes to Consolidated Financial Statements included in Item 8 hereof for a schedule of borrowings outstanding and their interest rates and other information related to the Company’s borrowings.

Junior Subordinated Debentures  The Company formed Independent Capital Trust III (“Trust III”) and Independent Capital Trust IV (“Trust IV”) in 2001 and 2002, respectively, for the purposes of each issuing $25.0 million Corporation Obligated Mandatory Redeemable Trust Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Corporation (“trust preferred securities”) and investing the proceeds in junior subordinated debentures issued by the Company (the “Junior Subordinated Debentures”). Additionally, each Trust III and Trust IV issued $773,000 in common securities to the Company. These proceeds were then used to redeem previously issued trust preferred securities issued at higher rates. The Company initially raised this capital for the purposes of supporting asset growth and the execution of a share repurchase.

In October 2006 the Company formed Independent Capital Trust V (“Trust V”), which issued and sold 50,000 trust preferred securities in December 2006. The Company received $50.0 million from the issuance of the trust preferred securities in return for junior subordinated debentures issued by the Company to Independent Capital Trust V. The interest rate of the trust preferred securities is a variable rate determined as the 3 month London Interbank Offered Rate plus 148 basis points. The Company has entered into interest rate swap agreements to fix the interest rate paid on the debentures for the next ten years at 6.52%. The trust preferred securities issued by Trust V were issued and sold in a private placement as part of a pool transaction. Additionally, Trust V issued $1.6 million in common securities to the Company.

The Company used $25.0 million of the proceeds from the issuance of the trust preferred securities of Trust V to redeem all of the outstanding trust preferred securities of Trust III on the first callable date of December 31, 2006 which had a fixed rate of interest at 8.625%. The Company intends to use the remaining $25.0 million of proceeds to redeem the outstanding trust preferred securities of Trust IV on its first callable date of April 30, 2007 which have a fixed rate of interest at 8.375%. The refinancing of the trust preferred securities, when fully completed, will decrease the Company’s annual debt service by approximately $1.0 million a year. The trust preferred securities of Trust V are subject to mandatory redemption when the debentures mature on March 15, 2037. The Company may redeem the debentures and the trust preferred securities at any time on or after March 15, 2012.

Effective March 31, 2004, Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46 Revised, “Consolidation of Variable Interest Entities — an Interpretation of Accounting Research Bulletin No. 51” (“FIN 46R”) required the Company to deconsolidate its two subsidiary trusts (Independent Capital Trust III and

44

Independent Capital Trust IV). The result of deconsolidating these subsidiary trusts is that trust preferred securities of the trusts, which were classified between liabilities and equity on the balance sheet (mezzanine section), no longer appear on the consolidated balance sheet of the Company. The related minority interest expense also is no longer included in the consolidated statement of income. Due to FIN 46R, the junior subordinated debentures of the Company that were previously eliminated in consolidation are now included on the consolidated balance sheet within total borrowings. The interest expense on the junior subordinated debentures is included in the calculation of net interest margin of the Company, negatively impacting the net interest margin by approximately 0.13% for the twelve months ending December 31, 2004 on an annualized basis and 0.16% for the twelve months ending 2005 and 2006. There is no impact on net income as the amount of interest previously recognized as minority interest is equal to the amount of interest expense that is recognized currently in the net interest margin offset by the dividend income on the subsidiary trusts common stock recognized in other non-interest income.

On March 1, 2005, the Board of Governors of the Federal Reserve issued a final ruling amending its risk-based capital standards for bank holding companies to allow continued inclusion of outstanding and prospective issuances of trust preferred securities in Tier 1 capital for regulatory capital purposes subject to quantitative limits applied to the aggregate amount of trust preferred securities and certain other capital elements. After a five-year transition period, the aggregate amount of trust preferred securities and certain other capital elements would be limited to 25 percent of Tier 1 capital elements, net of goodwill less any associated deferred tax liability. The amount of trust preferred securities and certain other elements in excess of the core capital limit generally will be includable in Tier 2 capital. At December 31, 2006 had the aforementioned rules been in effect, the Company’s aggregate amount of trust preferred securities would have represented 21.2% of Tier 1 capital, net of goodwill less any associated net deferred tax liability and therefore $50.0 million of trust preferred securities would be includable in Tier 1 capital. At December 31, 2006, there were $75.0 million of trust preferred securities outstanding, however, given that the Company intends to call $25.0 million in April 2007 the Federal Reserve Board has stipulated that this $25.0 million of callable trust preferred securities are not to be included in the calculation of regulatory capital.

Junior Subordinated Debentures were $77.3 million and $51.5 million at December 31, 2006 and 2005, respectively. The unamortized issuance costs are included in other assets. Unamortized issuance costs were $981,000 and $2.0 million in 2006 and 2005, respectively.

Minority interest expense was $1.1 million in 2004. Interest expense on the junior subordinated debentures, reported in interest on borrowings, which includes the amortization of the issuance cost, was $5.5 million in 2006 and $4.5 million in 2005. The increase in interest expense is mainly due to the write-off of $995,000 of issuance costs in connection with the redemption of trust preferred securities of Trust III.

The Company unconditionally guarantees all Trust IV and Trust V obligations under the trust preferred securities.

In December, the Trustees of Trust III and Trust IV declared a cash dividend of $0.54 and $0.52 per share to stockholders of record of Trust III and Trust IV, respectively, as of the close of business on December 28, 2006. The dividend was paid on December 29, 2006. The Company has paid all scheduled dividends.

Investment Management  As of December 31, 2006, the Rockland Trust Investment Management Group had assets under management of $815.8 million which represents approximately 1,530 trust, fiduciary, and agency accounts. At December 31, 2005, assets under management were $680.1 million, representing approximately 1,340 trust, fiduciary, and agency accounts. Income from the Investment Management Group amounted to $5.5 million, $4.9 million, and $4.2 million for 2006, 2005, and 2004, respectively.

Retail Investments and Insurance  For the year ending December 31, 2006, 2005 and 2004 retail investments and insurance income was $593,000, $404,000, and $517,000, respectively. Retail investments and insurance includes revenue from Linsco/Private Ledger (“LPL”), Private Ledger Insurance Services of Massachusetts, Savings Bank Life Insurance of Massachusetts (“SBLI”), Independent Financial Market Group, Inc. (“IFMG”) and their insurance subsidiary IFS Agencies, Inc. (“IFS”).

45

RESULTS OF OPERATIONS

Summary of Results of Operations  Net income was $32.9 million for the year ended December 31, 2006, compared to $33.2 million for the year ended December 31, 2005. Diluted earnings per share were $2.17 and $2.14 for the years ended 2006 and 2005, respectively.

In 2006 the Company realized BOLI benefit proceeds of $1.3 million, a recovery on WorldCom Bond Claims of $1.9 million, the write-off of stock issuance cost of $995,000, and prepayment fees on borrowings of $82,000. Security losses of $3.2 million were realized by the Company in 2006, as compared to $616,000 of security gains in 2005.

Return on average assets and return on average equity was 1.12% and 14.60%, respectively, for the year ending December 31, 2006 as compared to 1.11% and 15.10%, respectively, for the year ending December 31, 2005. Equity to assets was 8.1% as of December 31, 2006, compared to 7.50% for the same period last year.

Net Interest Income  The amount of net interest income is affected by changes in interest rates and by the volume, mix, and interest rate sensitivity of interest-earning assets and interest-bearing liabilities.

On a fully tax-equivalent basis, net interest income was $104.4 million in 2006, a 3.0% decrease from 2005 net interest income of $107.7 million reported in 2005.

The decrease in net interest income in 2006 compared with that of 2005 is primarily attributable to a smaller balance sheet and an increase in the cost of deposits. Additionally, the Company wrote off $995,000 of unamortized debt issuance costs upon redemption of $25.0 million of trust preferred securities in December 2006 which was realized as a component of interest expense on borrowings. The yield on earning assets was 6.25% in 2006, compared with 5.68% in 2005. The average balance of securities decreased by $131.7 million, or 17.1%, as compared with the prior year. The average balance of loans increased by $53.5 million, or 2.7%, and the yield on loans increased by 58 basis points to 6.70% in 2006, compared to 6.12% in 2005. This increase in the yield on earning assets was due to the higher interest rate environment in 2006 than during 2005 and growth in average loans. During 2006, the average balance of interest-bearing liabilities decreased by $48.8 million, or 2.2%, over 2005 average balances. The average cost of these liabilities increased to 2.98% compared to 2.23% in 2005. Earning assets and interest bearing liability pricing are affected by competition and changes in interest rates. Economic conditions and the Federal Reserve’s monetary policy influence interest rates as shown by the changes reflected in the following graph:

46

The following table presents the Company’s average balances, net interest income, interest rate spread, and net interest margin for 2006, 2005, and 2004. Non-taxable income from loans and securities is presented on a fully tax-equivalent basis whereby tax-exempt income is adjusted upward by an amount equivalent to the prevailing federal income taxes that would have been paid if the income had been fully taxable.

Table 15 — Average Balance, Interest Earned/Paid & Average Yields

	Years Ended December 31,
	2006							2005							2004
			Interest							Interest							Interest
	Average		Earned/		Average			Average		Earned/		Average			Average		Earned/		Average
	Balance		Paid		Yield			Balance		Paid		Yield			Balance		Paid		Yield
	(Dollars in thousands)											(Dollars in thousands)
Interest-Earning Assets:
Federal Funds Sold, Assets Purchased Under
Resale Agreement and Short Term Investments	$	29,464	$	1,514		5.14	%	$	14,023	$	515		3.67	%	$	750	$	17		2.27	%
Securities:
Trading Assets		1,570		42		2.68	%		1,548		36		2.33	%		1,507		48		3.19	%
Taxable Investment Securities		581,372		27,229		4.68	%		708,043		31,188		4.40	%		712,663		31,549		4.43	%
Non-Taxable Investment Securities(1)		57,725		3,879		6.72	%		62,771		4,126		6.57	%		64,215		4,261		6.64	%
Total Securities		640,667		31,150		4.86	%		772,362		35,350		4.58	%		778,385		35,858		4.61	%
Loans(1)		2,041,098		136,802		6.70	%		1,987,591		121,605		6.12	%		1,743,844		100,560		5.77	%
Total Interest-Earning Assets	$	2,711,229	$	169,466		6.25	%	$	2,773,976	$	157,470		5.68	%	$	2,522,979	$	136,435		5.41	%
Cash and Due from Banks		59,834							65,703							68,024
Other Assets		151,295							144,747							120,550
Total Assets	$	2,922,358						$	2,984,426						$	2,711,553
Interest-Bearing Liabilities:
Deposits:
Savings and Interest Checking Accounts	$	563,615	$	4,810		0.85	%	$	599,797	$	3,037		0.51	%	$	570,661	$	2,800		0.49	%
Money Market		524,265		14,872		2.84	%		519,461		9,549		1.84	%		456,970		5,871		1.28	%
Time Certificates of Deposits		563,212		21,111		3.75	%		510,611		13,172		2.58	%		478,037		10,254		2.15	%
Total Interest Bearing Deposits		1,651,092		40,793		2.47	%		1,629,869		25,758		1.58	%		1,505,668		18,925		1.26	%
Borrowings:
Federal Home Loan Bank Borrowings		365,597		15,524		4.25	%		468,821		18,162		3.87	%		407,836		13,900		3.41	%
Federal Funds Purchased and Assets Sold Under Repurchase Agreements		113,448		3,171		2.80	%		80,074		1,389		1.73	%		61,199		589		0.96	%
Junior Subordinated Debentures		51,899		5,504		10.61	%(4)		51,546		4,469		8.67	%		38,871		3,364		8.65	%
Treasury Tax and Loan Notes		1,081		46		4.26	%		1,653		40		2.42	%		3,154		19		0.60	%
Total Borrowings		532,025		24,245		4.56	%		602,094		24,060		4.00	%		511,060		17,872		3.50	%
Total Interest-Bearing Liabilities	$	2,183,117	$	65,038		2.98	%(4)	$	2,231,963	$	49,818		2.23	%	$	2,016,728	$	36,797		1.82	%
Demand Deposits		495,958							514,611							478,073
Corporation-Obligated Mandatorily Redeemable Securities of Subsidiary Holding Solely Parent Company Debentures		—							—							11,769
Other Liabilities		18,286							17,897							15,849
Total Liabilities	$	2,697,361						$	2,764,471						$	2,522,419
Stockholders’ Equity		224,997							219,955							189,134
Total Liabilities and Stockholders’ Equity	$	2,922,358						$	2,984,426						$	2,711,553
Net Interest Income(1)			$	104,428						$	107,652						$	99,638
Interest Rate Spread(2)						3.27	%(4)						3.45	%						3.59	%
Net Interest Margin(3)						3.85	%(4)						3.88	%						3.95	%
Supplemental Information:
Total Deposits, Including Demand Deposits	$	2,147,050	$	40,793				$	2,144,480	$	25,758				$	1,983,741	$	18,925
Cost of Total Deposits						1.90	%						1.20	%						0.95	%
Total Funding Liabilities, Including Demand Deposits	$	2,679,075	$	65,038				$	2,746,574	$	49,818				$	2,494,801	$	36,797
Cost of Total Funding Liabilities						2.43	%						1.81	%						1.47	%

(1) The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $1,773, $1,809 and $1,822 in 2006, 2005 and 2004, respectively.

47

(2)	Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average costs of interest-bearing liabilities.
(3)	Net interest margin represents net interest income as a percentage of average interest-earning assets.
(4)	In 2006, the yield on junior subordinated debentures, the interest rate spread and the net interest margin includes the write-off of $995,000 of unamortized issuance costs related to the refinancing of $25.8 million of junior subordinated debentures. The yield on junior subordinated debentures, total interest-bearing liabilities, the interest rate spread, and the net interest margin would have been 8.69%, 2.93%, 3.32%, and 3.89%, respectively.

The following table presents certain information on a fully-tax equivalent basis regarding changes in the Company’s interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (1) changes in rate (change in rate multiplied by prior year volume), (2) changes in volume (change in volume multiplied by prior year rate) and (3) changes in volume/rate (change in rate multiplied by change in volume).

Table 16 — Volume Rate Analysis

	Year Ended December 31,
	2006 Compared To 2005												2005 Compared To 2004												2004 Compared To 2003
							Change												Change												Change
	Change			Change			Due to						Change			Change			Due to						Change			Change			Due to
	Due to			Due to			Volume/			Total			Due to			Due to			Volume/			Total			Due to			Due to			Volume/			Total
	Rate			Volume			Rate			Change			Rate			Volume			Rate			Change			Rate			Volume			Rate			Change
				(Dollars in thousands)
Income on Interest-Earning
Assets:
Federal Funds Sold Assets Purchased Under Resale Agreement and Short Term Investments	$	206		$	567		$	226		$	999		$	10		$	301		$	187		$	498		$	1		$	0		$	16		$	17
Securities:
Trading Assets		5			1			—			6			(13	)		1			—			(12	)		—			12			—			12
Taxable Securities		1,974			(5,580	)		(353	)		(3,959	)		(157	)		(205	)		1			(361	)		(1,420	)		3,408			(163	)		1,825
Non-Taxable Securities(1)		92			(332	)		(7	)		(247	)		(40	)		(96	)		1			(135	)		(105	)		(51	)		1			(155	)
Total Securities:		2,071			(5,911	)		(360	)		(4,200	)		(210	)		(300	)		2			(508	)		(1,525	)		3,369			(162	)		1,682
Loans(1)(2)		11,611			3,274			312			15,197			6,132			14,056			857			21,045			(8,746	)		14,646			(1,334	)		4,566
Total	$	13,888		$	(2,070	)	$	178		$	11,996		$	5,932		$	14,057		$	1,046		$	21,035		$	(10,270	)	$	18,015		$	(1,480	)	$	6,265
Expense of Interest-Bearing
Liabilities:
Deposits:
Savings and Interest Checking Accounts	$	2,082		$	(183	)	$	(126	)	$	1,773		$	89		$	143		$	5		$	237		$	124		$	355		$	19		$	498
Money Market		5,187			88			48			5,323			2,529			803			346			3,678			220			1,306			67			1,593
Time Certificates of Deposits		5,967			1,357			615			7,939			2,077			699			142			2,918			(1,302	)		378			(44	)		(968	)
Total Interest-Bearing Deposits:		13,236			1,262			537			15,035			4,695			1,645			493			6,833			(958	)		2,039			42			1,123
Borrowings:
Federal Home Loan Bank Borrowings		1,745			(3,999	)		(384	)		(2,638	)		1,899			2,079			284			4,262			(2,099	)		2,067			(305	)		(337	)
Federal Funds Purchased and Assets Sold Under Repurchase Agreements		849			579			354			1,782			472			182			146			800			17			87			3			107
Junior Subordinated Debentures		998	(3)		31			6			1,035			6			1,097	(4)		2			1,105			—			—			3,364	(4)		3,364
Treasury Tax and Loan Notes		30			(14	)		(10	)		6			57			(9	)		(27	)		21			4			1			1			6
Total Borrowings		3,622			(3,403	)		(34	)		182			2,434			3,349			405			6,188			(2,078	)		2,155			3,063			3,140
Total	$	16,858		$	(2,141	)	$	503		$	15,220		$	7,129		$	4,994		$	898		$	13,021		$	(3,036	)	$	4,194		$	3,105		$	4,263
Change in Net Interest Income	$	(2,970	)	$	71		$	(325	)	$	3,224		$	(1,197	)	$	9,063		$	148		$	8,014		$	(7,234	)	$	13,821		$	(4,585	)	$	2,002

(1)	The total amount of adjustment to present interest income and yield on a fully tax-equivalent basis is $1,773, $1,809 and $1,822 in 2006, 2005 and 2004, respectively.
(2)	Loans include portfolio loans, loans held for sale and nonaccrual loans, however unpaid interest on nonperforming loans has not been included for purposes of determining interest income.

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(3)

In 2006, the yield on junior subordinated debentures, the interest rate spread and the net interest margin includes the write-off of $995,000 of unamortized issuance costs related to the refinancing of $25.8 million of junior subordinated debentures. The yield on junior subordinated debentures, the interest rate spread, and the net interest margin would have been 8.69%, 3.32%, and 3.89%, respectively.

(4)

In 2006 the change in the junior subordinated debentures interest expense is due to the write-off of $995,000 of unamortized issuance costs related to the refinancing of $25.8 million of junior subordinated debentures. In both 2005 and 2004, the change in interest expense is due to the adoption of Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46 Revised, “Consolidation of Variable Interest Entities — an Interpretation of Accounting Research Bulletin No. 51” (“FIN 46R”) which required the Company to deconsolidate its two subsidiary trusts (Independent Capital Trust III and Independent Capital Trust IV) on March 31, 2004. Due to FIN 46R, the junior subordinated debentures of the parent company that were previously eliminated in consolidation are now included on the consolidated balance sheet within total borrowings. The interest expense on the junior subordinated debentures is included in the calculation of net interest margin of the consolidated company, negatively impacting the net interest margin by approximately 0.13% for the twelve months ending December 31, 2004 on an annualized basis and 0.16% for the fiscal years to follow.

Net interest income on a fully tax-equivalent basis decreased by $3.2 million in 2006 compared to 2005. Interest income on a fully tax-equivalent basis increased by $12.0 million, or 7.6%, to $169.5 million in 2006 as compared to the prior year-end primarily contributable to the higher interest rate environment. Based upon increases in loan rates alone (not considering the impact of volume change and mix), interest income increased $11.6 million in 2006. Interest income from taxable securities decreased by $4.0, or 12.7%, to $27.2 million in 2006 as compared to the prior year. The overall yield on interest earning assets increased by 10.0% to 6.25% in 2006 as compared to 5.68% in 2005.

Interest expense for the year ended December 31, 2006 increased to $65.0 million from the $49.8 million recorded in 2005, an increase of $15.2 million, or 30.6%, of which $16.9 million is due to the increase in rates on deposits and borrowings. The total cost of funds increased 34.3% to 2.43% for 2006 as compared to 1.81% for 2005. Average interest-bearing deposits increased $21.2 million, or 1.3% over prior year along with the cost of these deposits from 1.58% to 2.47% primarily attributable to a higher rate environment.

Average borrowings decreased by $70.1 million, or 11.6%, from the 2005 average balance. The majority of this decrease is attributable to a decrease in Federal Home Loan Bank borrowings of $103.2 million offset by an increase in fed funds purchased of $33.4 million. The average cost of borrowings increased to 4.56% from 4.00%.

Provision For Loan Losses  The provision for loan losses represents the charge to expense that is required to maintain an adequate level of allowance for loan losses. The decrease in the level of provision is the result of a combination of factors including the deceleration in the rate of loan portfolio growth in the current interest rate environment and a decreased level of net loan charge-offs in 2006. The loan portfolio increased by 0.8% in 2006 as compared to 6.5% in 2005. Net charge-offs were $2.2 million, or 0.11% of average loans, in 2006 as compared to $2.7 million, or 0.014% of average loans, in 2005. Management’s periodic evaluation of the adequacy of the allowance considers past loan loss experience, known and inherent risks in the loan portfolio, adverse situations which may affect the borrowers’ ability to repay, the estimated value of the underlying collateral, if any, and current and prospective economic conditions. Substantial portions of the Bank’s loans are secured by real estate in Massachusetts. Accordingly, the ultimate collectibility of a substantial portion of the Bank’s loan portfolio is susceptible to changes in property values within the state.

The provision for loan losses totaled $2.3 million in 2006, compared with $4.2 million in 2005 a decrease of $1.9 million. The Company’s allowance for loan losses as a percentage of loans increased to 1.32%, an increase of 0.8% from the 1.31% on December 31, 2005. For the year ended December 31, 2006, net loan charge-offs totaled $2.2 million, a decrease of $574,000 from the prior year. The allowance for loan losses at December 31, 2006 was 384.22% of nonperforming loans, as compared to 797.81% at the prior year-end due to a higher level of non-performing assets. The provision for loan losses covered net charge-offs by 1.1 times at December 31, 2006.

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The provision for loan losses is based upon management’s evaluation of the level of the allowance for loan losses in relation to the estimate of loss exposure in the loan portfolio. An analysis of individual loans and the overall risk characteristics and size of the different loan portfolios is conducted on an ongoing basis. This managerial evaluation is reviewed periodically by a third-party loan review consultant. As adjustments are identified, they are reported in the earnings of the period in which they become known.

Non-Interest Income  The following table sets forth information regarding non-interest income for the periods shown.

Table 17 — Non-Interest Income

Years Ended December 31,	2006			2005		2004
	(Dollars in thousands)
Service charges on deposit accounts	$	14,233		$	13,103	$	12,345
Investment management services		6,128			5,287		4,683
Mortgage banking income		2,699			3,155		2,763
Bank owned life insurance		3,259			1,831		1,902
Net (loss)/gain on sales of securities		(3,161	)		616		1,458
Gain on branch sale		—			—		1,756
Other non-interest income		3,486			3,281		3,448
Total	$	26,644		$	27,273	$	28,355

Non-interest income, which is generated by deposit account service charges, investment management services, mortgage banking activities, and miscellaneous other sources, amounted to $26.6 million in 2006, a $629,000, or 2.3%, decrease from the prior year.

Service charges on deposit accounts, which represented 53.4% of total non-interest income in 2006, increased from $13.1 million in 2005 to $14.2 million in 2006, primarily reflecting increased overdraft fees and debit card revenue. Investment management services revenue increased by 15.9% to $6.1 million compared to $5.3 million in 2005, primarily due to growth in managed assets. Assets under administration at December 31, 2006 were $815.8 million, an increase of $135.7 million, or 20.0%, as compared to December 31, 2005.

Mortgage banking income of $2.7 million in 2006, decreased by 14.5% from the $3.2 million recorded in 2005. The decrease is primarily attributable to a lower volume of mortgage sales in 2006 as compared to 2005. The Bank’s mortgage banking revenue consists primarily of servicing released premiums, net servicing income, and gains and losses on the sale of loans which includes application fees and origination fees on sold loans. Gains and losses on sales of mortgage loans are recorded as mortgage banking income. The gains and losses resulting from the sales of loans with servicing retained are adjusted to recognize the present value of future servicing fee income over the estimated lives of the related loans. Residential real estate loans and the related servicing rights are sold on a flow basis. Mortgage servicing rights are amortized on a method that approximates the estimated weighted average life of the underlying loans serviced for others. Amortization is recorded as a charge against mortgage service fee income, a component of mortgage banking income. Rockland’s assumptions with respect to prepayments, which affect the estimated average life of the loans, are adjusted periodically to consider market consensus loan prepayment predictions at that date. At December 31, 2006 the mortgage servicing rights asset was $2.4 million, or 0.83%, of the serviced loan portfolio. At December 31, 2005 the mortgage servicing rights asset was $2.9 million, or 0.86%, of the serviced loan portfolio.

BOLI income for 2006 includes $1.3 million of a death benefit received on a former employee covered under the BOLI program leading to the increase in BOLI income of $1.4 million in 2006 as compared to 2005.

Net security losses were $3.2 million for the twelve months ended December 31, 2006 as compared to net security gains of $616,000 for the same period in 2005.

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Other non-interest income increased by $205,000, or 6.2% for the twelve months ended December 31, 2006, mainly due to improved checkbook revenue, commercial loan late charge fees and unrealized gains on trading assets.

Non-Interest Expense  The following table sets forth information regarding non-interest expense for the periods shown.

Table 18 — Non-Interest Expense

Years Ended December 31,	2006			2005		2004
	(Dollars in thousands)
Salaries and employee benefits	$	47,890		$	47,912	$	44,899
Occupancy and equipment expenses		10,060			10,070		8,894
Data processing and facilities management		4,440			4,091		4,474
Recovery on WorldCom bond claims		(1,892	)		—		—
Merger and acquisition		—			—		684
Other
Advertising		1,364			1,959		2,447
Telephone		1,298			1,385		1,777
Postage		1,056			1,006		942
Debit card and ATM processing		1,187			940		624
Software maintenance		963			873		308
Consulting		895			794		1,701
Examinations and audits		805			785		626
Legal fees		665			641		478
Business development		178			157		482
Other non-interest expense		10,445			10,002		9,355
Total other		18,856			18,542		18,740
Total	$	79,354		$	80,615	$	77,691

Non-interest expense decreased by $1.3 million, or 1.6%, during the year ended December 31, 2006 as compared to the same period last year. Salaries and employee benefits decreased by $22,000, or 0.1%, for the year ended December 31, 2006, as compared to the prior year mainly due to decreases in incentive compensation and sales commissions offset by an increase in the cost of employee retirement plan programs.

Occupancy and equipment expenses decreased $10,000, or 0.1%, for the twelve months ended December 31, 2006.

Data processing and facilities management expense has increased $349,000, or 8.5%, for the twelve months ended December 31, 2006, compared to the same period in 2005, largely as a result of contractual increases.

As previously announced, during the fourth quarter of 2006, the Company recovered $1.9 million on an impairment charge recognized in 2002 of $4.4 million on its investment in WorldCom bonds through settlement proceeds received from its claims in a class action case brought against WorldCom and from the WorldCom Victim Trust.

Other non-interest expenses increased by $314,000, or 1.7%, for the twelve months ended December 31, 2006, as compared to the same period in the prior year. The increase in the twelve month period is due to increased debit card and ATM processing, software maintenance and a prepayment penalty on borrowings.

Minority Interest  Effective March 31, 2004, the Company no longer reports the interest payable, net of the amortization of the issuance costs, on the trust preferred as Minority Interest. Rather, the interest expense on the

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junior subordinated debentures, offset by the amortization of the issuance costs, is captured in borrowings expense. See Junior Subordinated Debentures in Item 7 hereof.

Minority Interest expense was zero in 2006 and 2005 and $1.1 million in 2004. Interest expense on the junior subordinated debentures, reported in interest on borrowings, was $5.5 million in 2006, $4.5 million in 2005 and $3.3 million in 2004. In 2006, interest expense on junior subordinated debentures includes the write-off of $995,000 of unamortized issuance costs associated with the refinancing of the junior subordinated debentures issued to Trust III. See Junior Subordinated Debentures in Item 7 hereof.

Income Taxes  For the years ended December 31, 2006, 2005 and 2004 the Company recorded combined federal and state income tax provisions of $14.8 million, $15.1 million and $13.6 million, respectively. These provisions reflect effective income tax rates of 31.0%, 31.3% and 30.7%, in 2006, 2005, and 2004, respectively, which are less than the Bank’s blended federal and state statutory tax rate of 41.8%. The lower effective income tax rates are attributable to certain non-taxable interest and dividends, certain tax efficiency strategies employed by the Company, and tax credits. The effective rate decreased 30 basis points for 2006 as compared to 2005 mainly due to a decrease in securities held at the Company’s state tax advantaged security corporations year over year. The recognition of $1.5 million of New Markets Tax Credits in 2006 and 2005 and of $750,000 in 2004 has improved the Company’s effective rate by 3.2%, 3.1% and 1.7% for 2006, 2005 and 2004, respectively.

During the second quarter of 2004, one of the Company’s subsidiaries (a Community Development Entity, or “CDE”) was awarded $30.0 million in tax credit allocation authority under the New Markets Tax Credit Program of the United States Department of Treasury. In both 2004 and 2005, the Bank invested $15.0 million in the CDE providing it with the capital necessary to begin assisting qualified businesses in low-income communities throughout its market area. Based upon the Bank’s total $30.0 million investment, it will be eligible to receive tax credits from 2004 through 2011 totaling 39% of its investment, or $11.7 million. The Company began recognizing the benefit of these tax credits by reducing the provision for income taxes by $750,000 during 2004, and $1.5 million in both 2005 and 2006. The following table details the tax credit recognition by year based upon the $15.0 million invested in 2004 and 2005.

Table 19 — New Markets Tax Credit Recognition Schedule

																			Remaining		Recognized In
Investment			2004		2005		2006		2007		2008		2009		2010		2011		Total		2004 — 2006		Total
	(Dollars in thousands)
2004	$	15M	$	750	$	750	$	750	$	900	$	900	$	900	$	900	$	—	$	3,600	$	2,250	$	5,850
2005	$	15M		—	$	750	$	750	$	750	$	900	$	900	$	900	$	900	$	4,350	$	1,500	$	5,850
Total	$	30M	$	750	$	1,500	$	1,500	$	1,650	$	1,800	$	1,800	$	1,800	$	900	$	7,950	$	3,750	$	11,700

During 2006, the Company, through another of its CDE subsidiaries, was awarded another $45.0 million in tax credit allocation authority under the New Markets Tax Credit Program. The Company will be eligible to receive tax credits over a seven year period totaling 39% beginning from the date of each of its capital investments in the CDE subsidiary which received the $45.0 million award. No tax credits were recognized in 2006 related to this award.

The tax effects of all income and expense transactions are recognized by the Company in each year’s consolidated statements of income regardless of the year in which the transactions are reported for income tax purposes.

Comparison of 2005 vs. 2004  The Company’s assets increased to $3.0 billion in 2005, an increase of $97.8 million, or 3.3%, from the $2.9 billion reported in 2004. Securities decreased by $101.6 million, or 12.4%, to $716.6 million at December 31, 2005 from $818.2 million a year earlier. Loans increased by $124.5 million, or 6.5%, during the twelve months ended December 31, 2005. At December 31, 2005, deposits of $2.2 billion were $145.3 million, or 7.1%, higher than the prior year-end. Core deposits increased $65.4 million, or 4.1%, and time deposits increased $79.9 million, or 17.8%. Borrowings were $587.8 million at December 31, 2005, a decrease of $67.4 million from December 31, 2004. During 2004, the Company completed the acquisition of Falmouth Bancorp, Inc., parent of Falmouth Co-Operative Bank (“Falmouth”) resulting in total assets acquired of

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$158.4 million, total liabilities assumed of $141.6 million, or $16.8 million of net assets. For more insight into the acquisition see the 2004 Form 10-K.

Net income for 2005 was $33.2 million, or $2.14 per diluted share, compared to $30.8 million, or $2.03 per diluted share, for 2004. Return on average assets and return on average equity were 1.11% and 15.10%, respectively, for 2005 and 1.13% and 16.27%, respectively, for 2004.

Net interest income on a fully tax-equivalent basis increased by $8.0 million in 2005 compared to $99.6 million in 2004. Interest income on a fully tax-equivalent basis increased by $21.0 million, or 15.4%, to $157.5 million in 2005 as compared to the prior year-end primarily contributable to the growth in the average loan portfolio of $243.7 million to $2.0 billion during 2005. Based upon loan volume growth alone (not considering the impact of rate change and mix), interest income increased $14.1 million in 2005. Interest income from taxable securities decreased by $361,000, or 1.1%, to $31.2 million in 2005 as compared to the prior year. The overall yield on interest earning assets increased by 5.0% to 5.68% in 2005 as compared to 5.41% in 2004.

Interest expense for the year ended December 31, 2005 increased to $49.8 million from the $36.8 million recorded in 2004, an increase of $13.0 million, or 35.4%, of which $7.1 million is due to the increase in rates on deposits and borrowings. The total cost of funds increased 23.1% to 1.81% for 2005 as compared to 1.47% for 2004. Helping to offset some of the increase in the total cost of funds was a $36.5 million, or 7.6%, increase in non-interest bearing demand deposit balances. Average interest-bearing deposits increased $124.2 million, or 8.2%, over prior year along with the cost of these deposits from 1.26% to 1.58%, attributable to both a higher rate environment and increases in higher yielding deposit categories.

Average borrowings increased by $91.0 million, or 17.8%, from the 2004 average balance. The majority of this increase is attributable to an increase in Federal Home Loan Bank borrowings of $61.0 million with an additional $12.7 million of the increase resulting from the inclusion of junior subordinated debentures in borrowings for the full year in 2005 as compared to ten months in 2004 (see Junior Subordinated Debentures in Item 7 hereof). The average cost of borrowings increased to 4.00% from 3.50%.

For the year ended December 31, 2005, net loan charge-offs totaled $2.7 million, an increase of $879,000 from the prior year reflecting the change in the bankruptcy law in 2005. The allowance for loan losses at December 31, 2005 was 797.81% of nonperforming loans, as compared to 932.53% at the prior year-end.

Non-interest income, which is generated by deposit account service charges, investment management services, mortgage banking activities, and miscellaneous other sources, amounted to $27.3 million in 2005, a $1.1 million, or 3.8%, decrease from the prior year. The majority of the decrease is attributable to the sale of a bank branch in North Eastham, MA during the fourth quarter of 2004 that resulted in a pre-tax gain of approximately $1.8 million, as well as a decrease in net securities sales gains of $842,000. Service charges on deposit accounts, which represented 48.3% of total non-interest income in 2005, increased from $12.3 million in 2004 to $13.1 million in 2005, reflecting strong organic growth in core deposits, a full year of earnings related to the acquired deposits in 2005 and increased service charges on overdrafts and return check charges implemented in August 2005. Investment management services revenue increased by 12.9% to $5.3 million compared to $4.7 million in 2004, due to growth in managed assets. Assets under administration at December 31, 2005 were $680.1 million, an increase of $116.1 million, or 20.6%, as compared to December 31, 2004.

Mortgage banking income of $3.2 million in 2005 increased by 14.2% from the $2.8 million recorded in 2004. The increase is a result of selling a higher percentage of loan production and changes in market rates favorably impacting servicing asset amortization.

At December 31, 2005 the mortgage servicing rights asset was $2.9 million, or 0.86%, of the serviced loan portfolio. At December 31, 2004 the mortgage servicing rights asset was $3.3 million, or 0.84%, of the serviced loan portfolio.

Net security gains were $616,000 for the twelve months ended December 31, 2005 as compared to $1.5 million for the same period in 2004, a decrease of $842,000, or 57.8%.

Other non-interest income decreased by $290,000, or 8.4%, for the twelve months ended December 31, 2005, mainly due to a decrease in commercial loan prepayment fees.

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Non-interest expense increased by $2.8 million, or 3.6%, during the year ended December 31, 2005 as compared to the same period in the prior year. Salaries and employee benefits increased by $3.0 million, or 6.7%, for the year ended December 31, 2005, as compared to the prior year reflecting annual merit increases for employees, select additions to staff to support strategic initiatives, severance expense due to position eliminations of $333,000 recognized during the quarter ended December 31, 2005, an annual increase in performance based incentive compensation of $399,000, as well as increases in pension costs of $634,000 and medical insurance of $303,000.

Occupancy and equipment expenses increased $1.2 million, or 13.2%, for the twelve months ended December 31, 2005. The increase in this expense is primarily driven by facilities rent associated with the Falmouth Bancorp, Inc. acquisition which closed in mid-2004, closed branch lease buyout expense and the accelerated write-off of assets associated with these branch closings, two de novo branches, and increased depreciation expense related to a new phone system installed in 2004. Snow removal cost also increased by $165,000 on a year over year basis due to the inclement weather experienced in the early part of 2005.

Data processing and facilities management expense has decreased $383,000, or 8.6%, for the twelve months ended December 31, 2005, compared to the same period in 2004, as a result of a new data processing contract finalized in the latter part of 2004.

Merger and acquisition expense of $684,000 related to the purchase of Falmouth Bancorp, Inc. was recognized in the twelve months ended December 31, 2004. No merger and acquisition expense was recognized in 2005.

Other non-interest expenses decreased by $321,000, or 1.7%, for the twelve months ended December 31, 2005, as compared to the same period in the prior year. The decrease in the twelve month period is due to lower consultant fees of $907,000, advertising expense of $488,000, telephone expense of $392,000, and business development fees of $325,000. These charges were offset by increases in software maintenance fees of $565,000, ATM and debit card services of $316,000 related primarily to system conversion charges, and internet banking expense of $215,000.

Risk Management  The Company’s Board of Directors and executive management have identified seven significant “Risk Categories” consisting of credit, interest rate, liquidity, operations, compliance, reputation and strategic risk. The Board of Directors has approved a Risk Management Policy that addresses each category of risk. The chief executive officer, chief financial officer, chief technology and operations officer, the senior lending officer and other members of management provide regular reports to the Board of Directors that review the level of risk to limits established by the Risk Management Policy and other Policies approved by the Board of Directors that address risk and any key risk issues and plans to address these issues.

Asset/Liability Management  The Bank’s asset/liability management process monitors and manages, among other things, the interest rate sensitivity of the balance sheet, the composition of the securities portfolio, funding needs and sources, and the liquidity position. All of these factors, as well as projected asset growth, current and potential pricing actions, competitive influences, national monetary and fiscal policy, and the regional economic environment are considered in the asset/liability management process.

The Asset/Liability Management Committee (“ALCO”), whose members are comprised of the Bank’s senior management, develops procedures consistent with policies established by the Board of Directors, which monitor and coordinate the Bank’s interest rate sensitivity and the sources, uses, and pricing of funds. Interest rate sensitivity refers to the Bank’s exposure to fluctuations in interest rates and its effect on earnings. If assets and liabilities do not re-price simultaneously and in equal volume, the potential for interest rate exposure exists. It is management’s objective to maintain stability in the growth of net interest income through the maintenance of an appropriate mix of interest-earning assets and interest-bearing liabilities and, when necessary, within prudent limits, through the use of off-balance sheet hedging instruments such as interest rate swaps, floors and caps. The Committee employs simulation analyses in an attempt to quantify, evaluate, and manage the impact of changes in interest rates on the Bank’s net interest income. In addition, the Bank engages an independent consultant to render advice with respect to asset and liability management strategy.

The Bank is careful to increase deposits without adversely impacting the weighted average cost of those funds. Accordingly, management has implemented funding strategies that include FHLB advances and repurchase

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agreement lines. These non-deposit funds are also viewed as a contingent source of liquidity and, when profitable lending and investment opportunities exist, access to such funds provides a means to leverage the balance sheet.

From time to time, the Bank has utilized interest rate swap agreements and interest rates caps and floors as hedging instruments against interest rate risk. An interest rate swap is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount for a predetermined period of time from a second party. Interest rate caps and floors are agreements whereby one party agrees to pay a floating rate of interest on a notional principal amount for a predetermined period of time to a second party if certain market interest rate thresholds are realized. The assets relating to the notional principal amount are not actually exchanged.

At December 31, 2006 and December 31, 2005 the Company had interest rate swaps, designated as “cash flow” hedges. The purpose of these swaps is to hedge the variability in the cash outflows of LIBOR-based borrowings attributable to changes in interest rates. The table below shows interest rate derivatives the Company held as of December 31, 2006 and December 31, 2005:

Table 20 — Interest Rate Derivatives

	As of December 31, 2006
																	Market
									Receive					Pay Fixed			Value at
	Notional		Trade		Effective		Maturity		(Variable)		Current Rate			Swap Rate/			December 31,
	Amount		Date		Date		Date		Index		Received			Cap Strike Rate			2006
	(Dollars in thousands)
Interest Rate Swaps
	$	25,000		16-Jan-04		21-Jan-04		21-Jan-07		3 Month LIBOR		5.37	%		2.49	%	$	47
	$	35,000		18-Jan-05		20-Jan-05		20-Jan-10		3 Month LIBOR		5.37	%		4.06	%	$	936
	$	25,000		16-Feb-06		28-Dec-06		28-Dec-16		3 Month LIBOR		5.36	%		5.04	%	$	82
	$	25,000		16-Feb-06		28-Dec-06		28-Dec-16		3 Month LIBOR		5.36	%		5.04	%	$	89
Total	$	110,000													Total		$	1,154
Interest Rate Caps
	$	100,000		27-Jan-05		31-Jan-05		31-Jan-08		3 Month LIBOR		5.38	%		4.00	%	$	1,284
Grand Total	$	210,000
											Grand Total						$	2,438

	As of December 31, 2005
																	Market
									Receive					Pay Fixed			Value at
	Notional		Trade		Effective		Maturity		(Variable)		Current Rate			Swap Rate/			December 31,
	Amount		Date		Date		Date		Index		Received			Cap Strike Rate			2005
Interest Rate Swaps
	$	25,000		20-Sep-02		21-Nov-03		21-Nov-06		3 Month LIBOR		4.37	%		3.65	%	$	237
	$	25,000		20-Sep-02		21-Nov-03		21-Nov-06		3 Month LIBOR		4.37	%		3.65	%	$	237
	$	25,000		16-Jan-04		21-Jan-04		21-Jan-07		3 Month LIBOR		4.18	%		2.49	%	$	588
	$	35,000		18-Jan-05		20-Jan-05		20-Jan-10		3 Month LIBOR		4.17	%		4.06	%	$	905
Total	$	110,000													Total		$	1,967
Interest Rate Caps
	$	100,000		27-Jan-05		31-Jan-05		31-Jan-08		3 Month LIBOR		4.26	%		4.00	%	$	1,655
Grand Total	$	210,000
											Grand Total						$	3,622

During February, 2006 the Company entered into two forward starting swaps, each with a $25.0 million notional amount, with the intention of hedging $50.0 million variable rate (LIBOR plus 148 basis points) trust preferred securities. On December 28, 2006, these forward starting swaps became effective when Trust V issued $50.0 million of trust preferred securities (see Junior Subordinated Debentures within Item 7. hereof) which pay interest at a variable rate of interest of LIBOR plus 148 basis points. Through these swaps the Company has effectively locked in a fixed rate of 6.52% on that debt obligation.

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As a result of the prolonged flat/inverted yield curve environment and the resulting strategy to de-leverage the balance sheet, management unwound $50.0 million of notional value of interest rate swaps hedging 3 month revolving FHLB advances tied to LIBOR and paid down the underlying borrowings. The influx of liquidity associated with cash flows from the securities portfolio not being reinvested made the borrowings unnecessary. Gains of $237,000 and $215,000 were realized against interest expense in the first quarter of 2006 and the third quarter of 2005, respectively, associated with the sale of these interest rate swaps.

Additionally, the Company enters into commitments to fund residential mortgage loans with the intention of selling them in the secondary markets. The Company also enters into forward sales agreements for certain funded loans and loan commitments to protect against changes in interest rates. The Company records unfunded commitments and forward sales agreements at fair value with changes in fair value as a component of Mortgage Banking Income.

The following table sets forth the fair value of residential mortgage loan commitments and forward sales agreements at the periods indicated:

Table 21 — Fair Value of Residential Mortgage Loan Commitments and Forward Sales Agreements

	Fair Value at
	December 31,		December 31,
	2006		2005
	(Dollars in thousands)
Residential Mortgage Loan Commitments	$	93	$	108
Forward Sales Agreements	$	60	$	(22	)

	Change for the Twelve Months
	Ended December 31,
	2006			2005
Residential Mortgage Loan Commitments	$	(15	)	$	(40	)
Forward Sales Agreements	$	82		$	25
Total Change in Fair Value	$	67		$	(15	)

Changes in these fair values are recorded as a component of mortgage banking income.

Market Risk  Market risk is the sensitivity of income to changes in interest rates, foreign exchange rates, commodity prices and other market-driven rates or prices. The Company has no trading operations, with the exception of funds managed by the Company’s investment management group and that are held within a trust to fund non-qualified executive retirement obligations (see Note 3, Trading Assets, in Item 8 hereof), and thus is only exposed to non-trading market risk.

Interest-rate risk is the most significant non-credit risk to which the Company is exposed. Interest-rate risk is the sensitivity of income to changes in interest rates. Changes in interest rates, as well as fluctuations in the level and duration of assets and liabilities, affect net interest income, the Company’s primary source of revenue. Interest-rate risk arises directly from the Company’s core banking activities. In addition to directly impacting net interest income, changes in the level of interest rates can also affect the amount of loans originated, the timing of cash flows on loans and securities and the fair value of securities and derivatives as well as other affects.

The primary goal of interest-rate risk management is to control this risk within limits approved by the Board. These limits reflect the Company’s tolerance for interest-rate risk over both short-term and long-term horizons. The Company attempts to control interest-rate risk by identifying, quantifying and, where appropriate, hedging its exposure. The Company manages its interest-rate exposure using a combination of on and off-balance sheet instruments, primarily fixed rate portfolio securities, and interest rate swaps.

The Company quantifies its interest-rate exposures using net interest income simulation models, as well as simpler gap analysis, and Economic Value of Equity (EVE) analysis. Key assumptions in these simulation analyses

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relate to behavior of interest rates and behavior of the Company’s deposit and loan customers. The most material assumptions relate to the prepayment of mortgage assets (including mortgage loans and mortgage-backed securities) and the life and sensitivity of nonmaturity deposits (e.g. DDA, NOW, savings and money market). The risk of prepayment tends to increase when interest rates fall. Since future prepayment behavior of loan customers is uncertain, the resultant interest rate sensitivity of loan assets cannot be determined exactly.

To mitigate these uncertainties, the Company gives careful attention to its assumptions. In the case of prepayment of mortgage assets, assumptions are derived from published dealer median prepayment estimates for comparable mortgage loans.

The Company manages the interest-rate risk inherent in its mortgage banking operations by entering into forward sales contracts. An increase in market interest rates between the time the Company commits to terms on a loan and the time the Company ultimately sells the loan in the secondary market will have the effect of reducing the gain (or increasing the loss) the Company records on the sale. The Company attempts to mitigate this risk by entering into forward sales commitments in amounts sufficient to cover all closed loans and a majority of rate-locked loan commitments.

The Company’s policy on interest-rate risk simulation specifies that if interest rates were to shift gradually up or down 200 basis points, estimated net interest income for the subsequent 12 months should decline by less than 6.0%. The Company was well within policy limits at December 31, 2006 and 2005.

The Company’s earnings are not directly and materially impacted by movements in foreign currency rates or commodity prices. Movements in equity prices may have an indirect but modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related business lines.

The following table sets forth the estimated effects on the Company’s net interest income over a 12-month period following the indicated dates in the event of the indicated increases or decreases in market interest rates:

Table 22 — Interest Rate Sensitivity

	200 Basis Point			200 Basis Point
	Rate Increase			Rate Decrease
December 31, 2006		(2.72	%)		(0.78	%)
December 31, 2005		(1.56	%)		(0.87	%)

The results implied in the above table indicate estimated changes in simulated net interest income for the subsequent 12 months assuming a gradual shift up or down in market rates of 200 basis points across the entire yield curve. It should be emphasized, however, that the results are dependent on material assumptions such as those discussed above. For instance, asymmetrical rate behavior can have a material impact on the simulation results. If competition for deposits forced the Company to raise rates on those liabilities quicker than is assumed in the simulation analysis without a corresponding increase in asset yields, net interest income may be negatively impacted. Alternatively, if the Company is able to lag increases in deposit rates as loans re-price upward net interest income would be positively impacted.

The most significant factors affecting market risk exposure of the Company’s net interest income during 2006 were (i) changes in the composition and prepayment speeds of mortgage assets and loans, (ii) the shape of the U.S. Government securities and interest rate swap yield curve, (iii) the level of U.S. prime interest rates, and (iv) the level of rates paid on deposit accounts.

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The table below provides information about the Company’s derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps, interest rate caps and debt obligations. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted average interest rates by expected maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average variable rates are based on implied forward rates at the reporting date. For interest rate caps, the table presents notional amounts by expected maturity dates, as well as the strike rate, and the anticipated average interest rate the cap will pay based upon the implied forward rates at the reporting date.

Table 23 — Expected Maturities of Long Term Debt and Interest Rate Derivatives

	2007			2008			2009			2010			2011			Thereafter			Total			Fair Value
	(Dollars in thousands)
LIABILITIES
Long Term debt:
Fixed Rate	$	3		$	25,003		$	3		$	50,003		$	20,003		$	50,113		$	145,128		$	150,008
Average interest rate		3.75	%		2.66	%		3.75	%		4.95	%		4.82	%		4.89	%		4.52	%
Variable Rate		—			—			—			—			—			—			—
Average interest rate		—			—			—			—			—			—			—
INTEREST RATE DERIVATIVES
Interest Rate Swaps:
Variable to Fixed	$	25,000		$	—			—		$	35,000			—		$	50,000		$	110,000		$	1,154
Average pay rate		2.49	%		—			—			4.06	%		—			5.04	%		4.15	%
Average receive rate		5.37	%		—			—			4.96	%		—			5.07	%		5.10	%
Fixed to Variable		—			—			—			—			—			—			—
Average pay rate		—			—			—			—			—			—			—
Average receive rate		—			—			—			—			—			—			—
Interest Rate Cap:
Variable Rate with Interest Rate Cap		—		$	100,000			—			—			—			—			—		$	1,284
Interest rate cap strike rate		—			4.00	%		—			—			—			—			—
Net receive rate (1)		—			1.20	%		—			—			—			—			—

(1) Represents anticipated weighted average rate received from the interest rate cap.

Liquidity  Liquidity, as it pertains to the Company, is the ability to generate adequate amounts of cash in the most economical way for the institution to meet its ongoing obligations to pay deposit withdrawals and to fund loan commitments. The Company’s primary sources of funds are deposits, borrowings, and the amortization, prepayment and maturities of loans and securities.

The Bank utilizes its extensive branch network to access retail customers who provide a stable base of in-market core deposits. These funds are principally comprised of demand deposits, interest checking accounts, savings accounts, and money market accounts. Deposit levels are greatly influenced by interest rates, economic conditions, and competitive factors. The Bank has also established repurchase agreements, with major brokerage firms as potential sources of liquidity. At December 31, 2006, the Company had $25.0 million outstanding of such repurchase agreements. In addition to agreements with brokers, the Bank also had customer repurchase agreements outstanding amounting to $83.2 million at December 31, 2006. As a member of the Federal Home Loan Bank, the Bank has access to approximately $508.9 million of borrowing capacity. On December 31, 2006, the Bank had $305.1 million outstanding in FHLB borrowings.

The Company, as a separately incorporated bank holding company, has no significant operations other than serving as the sole stockholder of the Bank. Its commitments and debt service requirement, at December 31, 2006, consist of junior subordinated debentures, including accrued interest, issued to two unconsolidated subsidiaries, $25.8 million to Independent Capital Trust IV and $51.5 million to Independent Capital Trust V, in connection with the issuance of 8.375% Capital Securities due in 2032 and variable rate (LIBOR plus 1.48%) Capital Securities due in 2037, for which the Company has locked in a fixed rate of interest of 6.52% for 10 years through an interest rate swap. See Note 8 “Borrowings” of Notes to Consolidated Financial Statements of Item 8 hereof for the Company’s intention to call the junior subordinated debentures issued to Independent Capital Trust IV in April 2007. The

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Parent’s only obligations relate to its reporting obligations under the Securities and Exchange Act of 1934, as amended and related expenses as a publicly traded company. The Company funds virtually all expenses through dividends paid by the Bank.

The Company actively manages its liquidity position under the direction of the Asset/Liability Management Committee. Periodic review under prescribed policies and procedures is intended to ensure that the Company will maintain adequate levels of available funds. At December 31, 2006 the Company’s liquidity position was well above policy guidelines. Management believes that the Bank has adequate liquidity available to respond to current and anticipated liquidity demands.

Capital Resources  The Federal Reserve Board (“FRB”), the Federal Deposit Insurance Corporation (“FDIC”), and other regulatory agencies have established capital guidelines for banks and bank holding companies. Risk-based capital guidelines issued by the federal regulatory agencies require banks to meet a minimum Tier 1 risk-based capital ratio of 4.0% and a total risk-based capital ratio of 8.0%. At December 31, 2006, the Company and the Bank exceeded the minimum requirements for Tier 1 risk-based and total risk-based capital.

A minimum requirement of 4.0% Tier 1 leverage capital is also mandated. On December 31, 2006, the Tier 1 leverage capital ratio for the Company and the Bank was 8.05% and 7.60%, respectively.

Table 24 — Capital Ratios for the Company and the Bank

	At December 31,
	2006			2005
The Company
Tier 1 leverage capital ratio		8.05	%		7.71	%
Tier 1 risk-based capital ratio		11.05	%		10.74	%
Total risk-based capital ratio		12.30	%		11.99	%
The Bank
Tier 1 leverage capital ratio		7.60	%		7.22	%
Tier 1 risk-based capital ratio		10.42	%		10.07	%
Total risk-based capital ratio		11.67	%		11.32	%

(See Note 17, “Regulatory Capital Requirements” of Notes to Consolidated Financial Statements in Item 8 hereof.)

On January 19, 2006, the Company’s Board of Directors approved a common stock repurchase program. Under the program, the Company was authorized to repurchase up to 800,000 shares, or approximately 5% of the Company’s outstanding common stock. During the quarter ended September 30, 2006, the Company completed its repurchase plan with a total of 800,000 shares of common stock repurchased at a weighted average share price of $31.04.

On December 14, 2006, the Company’s Board of Directors approved another common stock repurchase program. Under the program, which was effective immediately, the Company is authorized to repurchase up to 1,000,000 shares, or approximately 7% of the Company’s outstanding common stock. The Company placed no deadline on the repurchase program, but expects to make open market or privately negotiated purchases from time to time. The timing and amount of stock repurchases will depend upon market conditions, securities law limitations, and other corporate considerations. The repurchase program may be modified, suspended, or terminated by the Board of Directors at any time.

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Contractual Obligations, Commitments, Contingencies, and Off-Balance Sheet Financial Instruments

The Company has entered into contractual obligations and commitments and off-balance sheet financial instruments. The following tables summarize the Company’s contractual cash obligations and other commitments and off-balance sheet financial instruments at December 31, 2006.

Table 25 — Contractual Obligations, Commitments, and
Off-Balance Sheet Financial Instruments by Maturity

	Payments Due — By Period
			Less than		One to		Four to		After Five
Contractual Obligations	Total		One Year		Three Years		Five Years		Years
	(Dollars in thousands)
FHLB advances(1)	$	305,128	$	160,003	$	25,006	$	70,006	$	50,113
Junior subordinated debentures(1)		77,320		—		—		—		77,320
Lease obligations		13,327		2,389		4,169		2,715		4,054
Data processing and core systems		18,592		5,321		9,803		3,468		—
Other vendor contracts		2,414		1,452		962		—		—
Retirement benefit obligations(2)		26,064		173		465		596		24,830
Other
Treasury tax & loan notes		2,953		2,953		—		—		—
Securities sold under repurchase agreements		25,000		—		—		25,000		—
Customer repurchase agreements		83,248		83,248		—		—		—
Total contractual cash obligations	$	554,046	$	255,539	$	40,405	$	101,785	$	156,317

	Amount of Commitment Expiring — By Period
Off-Balance Sheet			Less than		One to		Four to		After
Financial Instruments	Total		One Year		Three Years		Five Years		Five Years
Lines of credit	$	303,958	$	37,515	$	—	$	—	$	266,443
Standby letters of credit		8,318		8,318		—		—		—
Other loan commitments		249,039		219,418		22,645		4,948		2,028
Forward commitments to sell loans		20,478		20,478		—		—		—
Interest rate swaps — notional value(1)(3)		110,000		25,000		—		35,000		50,000
Interest rate caps — notional value(1)(4)		100,000		—		100,000		—		—
Total Commitments	$	791,793	$	310,729	$	122,645	$	39,948	$	318,471

(1)	The Company has hedged certain short term borrowings and junior subordinated debentures.
(2)	Retirement benefit obligations include expected contributions to the Company’s pension plan, post retirement plan, and supplemental executive retirement plans. Expected contributions for the pension plan have been included only through plan year July 1, 2006 — June 30, 2007. Contributions beyond this plan year can not be quantified as they will be determined based upon the return on the investments in the plan. Expected contributions for the post retirement plan and supplemental executive retirement plans include obligations that are payable over the life of the participants.
(3)	Interest rate swaps on borrowings and junior subordinated debentures (Bank pays fixed, receives variable).
(4)	Interest rate cap on borrowings (4.00% 3-month LIBOR strike rate).

See Note 16, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements included in Item 8 hereof for a discussion of the nature, business purpose, and importance of off-balance sheet arrangements.

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Guarantees  FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” considers standby letters of credit, excluding commercial letters of credit and other lines of credit, a guarantee of the Bank. The Bank enters into a standby letter of credit to guarantee performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved is represented by the contractual amounts of those instruments. Under the standby letters of credit, the Bank is required to make payments to the beneficiary of the letters of credit upon request by the beneficiary so long as all performance criteria have been met. Most guarantees extend up to one year. At December 31, 2006 the maximum potential exposure amount of future payments is $8.1 million.

The collateral obtained is determined based upon management’s credit evaluation of the customer and may include cash, accounts receivable, inventory, property, plant, and equipment and income-producing real estate. The majority of the Bank’s letters of credit are collateralized by cash. The recourse provisions of the agreements allow the Bank to collect the cash used to collateralize the agreement. If other business assets are used as collateral and cash is not available, the Bank creates a loan for the customer with the same criteria of its other lending activities. All of the Bank’s exposure is covered by collateral. The fair value of the guarantees are $62,000 and $61,000 at December 31, 2006 and 2005, respectively. The fair value of these guarantees is not material and not reflected on the balance sheet.

Return on Equity and Assets  The consolidated returns on average equity and average assets for the year ended December 31, 2006 were 14.60% and 1.12%, respectively, compared to 15.10% and 1.11% reported for the same periods last year. The ratio of equity to assets was 8.1% at December 31, 2006 and 7.5% at December 31, 2005.

During December, 2006 the Company’s Board of Directors approved a common stock repurchase program. Under the program, the Company is authorized to repurchase up to 1,000,000 shares of the Company’s outstanding common stock. The Company began repurchasing under this program in January of 2007. During the quarter ending September 30, 2006, the Company completed a stock repurchase program approved in January of 2006. The Company purchased a total of 800,000 shares of common stock under the stock repurchase program approved in January 2006, at a weighted average share price of $31.04.

Dividends  The Company declared cash dividends of $0.64 per common share in 2006 and $0.60 per common share in 2005. The 2006 and 2005 ratio of dividends paid to earnings was 29.10% and 27.79% respectively.

Since substantially all of the funds available for the payment of dividends are derived from the Bank, future dividends will depend on the earnings of the Bank, its financial condition, its need for funds, applicable governmental policies and regulations, and other such matters as the Board of Directors deems appropriate. Management believes that the Bank will continue to generate adequate earnings to continue to pay dividends.

The Trustees of Trust III and Trust IV declared cash dividends of $2.16 and $2.08 per share to stockholders of record of Trust III and Trust IV, respectively in 2006. The dividends are funded through the interest paid by the Bank on the junior subordinated debentures of 8.625% and 8.375% to Trust III and Trust IV, respectively.

Impact of Inflation and Changing Prices  The consolidated financial statements and related notes thereto presented elsewhere herein have been prepared in accordance with accounting principles generally accepted in the United States of America which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation.

The financial nature of the Company’s consolidated financial statements is more clearly affected by changes in interest rates than by inflation. Interest rates do not necessarily fluctuate in the same direction or in the same magnitude as the prices of goods and services. However, inflation does affect the Company because, as prices increase, the money supply grows and interest rates are affected by inflationary expectations. The impact on the Company is a noted increase in the size of loan requests with resulting growth in total assets. In addition, operating expenses may increase without a corresponding increase in productivity. There is no precise method, however, to measure the effects of inflation on the Company’s consolidated financial statements. Accordingly, any examination or analysis of the financial statements should take into consideration the possible effects of inflation.

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Recent Accounting Pronouncements

SFAS No. 155 (“SFAS 155”), “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140”  In February 2006, the FASB issued SFAS 155. SFAS 155 amends SFAS 133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”) and SFAS 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”). This Statement permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; clarifies which interest- and principal-only strips are not subject to SFAS 133; requires an evaluation of interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amends SFAS 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This SFAS is effective for all financial instruments acquired or issued after the beginning of an entity’s fiscal year that begins after September 15, 2006 and the fair value election may be applied upon adoption to hybrid financial instruments that had been bifurcated under SFAS 133 prior to the adoption of this statement. As this standard is effective for the Company beginning on January 1, 2007, if the Company were to acquire or issue financial instruments subsequent to that date the guidance in SFAS 155 would be applied and the Company will consider applying the fair value election to its hybrid financial instruments that have been bifurcated under SFAS 133. Upon adoption of SFAS 155 there will be no impact to the Company.

SFAS No. 156 (“SFAS 156”), “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140”  In March 2006, the FASB issued SFAS 156. SFAS 156 amends SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. This Statement requires an entity to recognize a servicing asset or servicing liability when it undertakes an obligation to service a financial asset in certain situations; requires separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable; permits an entity to choose between an amortization or fair value measurement method for each class of separately recognized servicing assets and servicing liabilities; at initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights; requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. SFAS 156 is to be adopted as of the beginning of an entity’s fiscal year that begins after September 15, 2006, with earlier adoption permitted, provided the entity has not yet issued financial statements for any period of that fiscal year. The effective date of SFAS 156 is the date an entity adopts it, and an entity should apply the requirements for recognition and initial measurement of servicing assets and servicing liabilities prospectively to all transactions after the effective date. The Company has not yet adopted SFAS 156 and is not required to do so until the Company’s fiscal year that begins on January 1, 2007. The Company does not believe that the adoption of SFAS 156 will have a material impact on the Company’s financial position.

SFAS No. 157 (“SFAS 157”), “Fair Value Measurements”  In September 2006, the FASB issued SFAS 157. SFAS 157 was issued to provide consistency and comparability in determining fair value measurements and to provide for expanded disclosures about fair value measurements. The definition of fair value maintains the exchange price notion in earlier definitions of fair value but focuses on the exit price of the asset or liability. The exit price is the price that would be received to sell the asset or paid to transfer the liability adjusted for certain inherent risks and restrictions. Expanded disclosures are also required about the use of fair value to measure assets and liabilities. The effective date is for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not believe that the adoption of SFAS 157 will have a material impact on the Company’s financial position or results of operations.

SFAS No. 158 (“SFAS 158”), “Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans- An Amendment of FASB Statements No. 87, 88, 106, and 132(R).”  In September 2006, the FASB issued SFAS 158. SFAS 158 will require companies to recognize the over-funded and under-funded status of a single employer defined benefit postretirement plans as an asset or liability in its balance sheet and to recognize changes in the funded status in comprehensive income in the year in which the change occurred. However, gains or losses, prior service costs or credits, and transition assets or obligations that have not yet been included in net periodic benefit

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cost as of the end of 2006, the fiscal year in which SFAS 158 is initially applied, are to be recognized as components of the ending balance of accumulated other comprehensive income, net of tax. Additionally, SFAS 158 will require companies to measure the funded status of a plan as of the date of the fiscal year-end financial statements with limited exceptions effective for fiscal years ending after December 15, 2008. The Company adopted SFAS 158 as of December 31, 2006 for its “other” post retirement plans including its supplemental executive retirement plans and its post retirement benefits plan, the effects of which can be seen within Note 13 “Employee Benefits” hereof. The Company’s pension plan falls outside the scope of SFAS 158 because it is accounted for as a multiemployer plan.

FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”  In June 2006, the FASB issued FIN 48, an interpretation of SFAS No. 109, “Accounting for Income Taxes,” in order to add clarity to the accounting for uncertainty in income taxes recognized in a Company’s financial statements. The interpretation requires that only tax positions that are more likely than not to be sustained upon a tax examination are to be recognized in a Company’s financial statements to the extent that the benefit has a greater than 50% likelihood of being recognized. The differences that arise between the amounts recognized in the financial statements and the amounts recognized in the tax return will lead to an increase or decrease in current taxes, an increase or decrease to the deferred tax asset or deferred tax liability, respectively, or both. FIN 48 is effective for fiscal years beginning after December 15, 2006 with early application encouraged if interim financial statements have not yet been issued. The adoption of FIN 48 did not have a material impact on the Company’s financial position.

Staff Accounting Bulletin (“SAB”) No. 108  In September 2006, the SEC issued SAB No. 108. SAB No. 108 was issued to provide guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB No. 108 addresses the diversity in practice in quantifying financial statement misstatements and requires companies to quantify the effects of an identified unadjusted error on each financial statement and financial statement disclosure by considering the impact of prior year misstatements on the current year financial statements. Initial application of SAB No. 108 allows companies to elect not to restate prior periods but to reflect the initial application in their annual financial statements covering the first fiscal year ending after November 15, 2006. The cumulative effect of the initial application should be reported in the carrying amounts of assets and liabilities as of the beginning of that fiscal year, and the offsetting adjustment, net of tax, should be made to the opening balance of retained earnings for that year. Companies should disclose the nature and amount of each item, when and how each error being corrected arose, and the fact that the errors were previously considered immaterial. The adoption of SAB No. 108 did not have a material impact on the Company’s financial position or results of operations because the Company had no prior year misstatements that were material to the current year’s financial statements.

Emerging Issues Task Force (“EITF”) Issue No. 06-5 (“EITF 06-5”), “Accounting for Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance With FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance”  In Issue 06-5, a determination of the amount that could be realized under an insurance contract should (1) consider any additional amounts (beyond cash surrender value) included in the contractual terms of the policy and (2) be based on assumed surrender at the individual policy or certificate level, unless all policies or certificates are required to be surrendered as a group. When it is probable that contractual restrictions would limit the amount that could be realized, such contractual limitations should be considered. Any amounts recoverable at the insurance company’s discretion should be excluded from the amount that could be realized. Fixed amounts recoverable in excess of one year should be recorded at their present values. This EITF is effective for fiscal years beginning after December 15, 2006, and an entity should recognize the effects of applying the EITF through either (1) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets as of the beginning of the year of adoption, or (2) a change in accounting principle through retrospective application to all prior periods. The Company does not believe that the adoption of EITF 06-5 will have a material impact on the Company’s financial position.

Item 7A.   Quantitative and Qualitative Disclosures about Market Risk

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Assets and Liability Management” in Item 7 hereof.

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Item 8.   Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Independent Bank Corp.:

We have audited the accompanying consolidated balance sheets of Independent Bank Corp. and subsidiaries (the Company) as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders’ equity, comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Independent Bank Corp. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Independent Bank Corp.’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

Boston, Massachusetts

February 26, 2007

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CONSOLIDATED BALANCE SHEETS

	At December 31,
	2006			2005
	(Dollars in thousands)
ASSETS
CASH AND DUE FROM BANKS	$	62,773		$	66,289
FEDERAL FUNDS SOLD AND ASSETS PURCHASED UNDER RESALE AGREEMENT & SHORT TERM INVESTMENTS		75,518			63,662
SECURITIES
TRADING ASSETS (Note 3)		1,758			1,557
SECURITIES AVAILABLE FOR SALE (Notes 1 and 4)		417,088			581,516
SECURITIES HELD TO MATURITY (Notes 1 and 4) (fair value $78,038 and $106,730)		76,747			104,268
FEDERAL HOME LOAN BANK STOCK (Note 8)		21,710			29,287
TOTAL SECURITIES		517,303			716,628
LOANS (Notes 1 and 5)
COMMERCIAL AND INDUSTRIAL		174,356			155,081
COMMERCIAL REAL ESTATE		740,517			683,240
COMMERCIAL CONSTRUCTION		119,685			140,643
BUSINESS BANKING		59,910			51,373
RESIDENTIAL REAL ESTATE		378,368			428,343
RESIDENTIAL CONSTRUCTION		7,277			8,316
RESIDENTIAL LOANS HELD FOR SALE		11,859			5,021
CONSUMER — HOME EQUITY		277,015			251,852
CONSUMER — AUTO		206,845			263,179
CONSUMER — OTHER		49,077			53,760
TOTAL LOANS		2,024,909			2,040,808
LESS: ALLOWANCE FOR LOAN LOSSES		(26,815	)		(26,639	)
NET LOANS		1,998,094			2,014,169
BANK PREMISES AND EQUIPMENT, NET (Notes 1 and 6)		37,316			37,431
GOODWILL (Notes 1 and 10)		55,078			55,078
CORE DEPOSIT INTANGIBLES (Notes 1 and 10)		1,457			1,780
MORTGAGE SERVICING RIGHTS (Note 1)		2,439			2,892
BANK OWNED LIFE INSURANCE (Note 13)		45,759			44,762
OTHER ASSETS (Note 11)		33,182			38,994
TOTAL ASSETS	$	2,828,919		$	3,041,685
LIABILITIES AND STOCKHOLDERS’ EQUITY
DEPOSITS
DEMAND DEPOSITS	$	490,036		$	511,920
SAVINGS AND INTEREST CHECKING ACCOUNTS		577,443			613,840
MONEY MARKET		455,737			550,677
TIME CERTIFICATES OF DEPOSIT OVER $100,000 (Note 7)		179,154			167,242
OTHER TIME CERTIFICATES OF DEPOSIT (Note 7)		387,974			361,815
TOTAL DEPOSITS		2,090,344			2,205,494
FEDERAL HOME LOAN BANK BORROWINGS (Note 8)		305,128			417,477
FEDERAL FUNDS PURCHASED AND ASSETS SOLD UNDER REPURCHASE AGREEMENTS (Note 8)		108,248			113,335
JUNIOR SUBORDINATED DEBENTURES (Note 8)		77,320			51,546
TREASURY TAX AND LOAN NOTES (Note 8)		2,953			5,452
TOTAL BORROWINGS		493,649			587,810
OTHER LIABILITIES		15,143			20,229
TOTAL LIABILITIES	$	2,599,136		$	2,813,533
COMMITMENTS AND CONTINGENCIES (Note 16)
STOCKHOLDERS’ EQUITY (Note 1)
PREFERRED STOCK, $.01 par value. Authorized: 1,000,000 Shares Outstanding: None	$	—		$	—
COMMON STOCK, $.01 par value. Authorized: 30,000,000
Issued: 14,686,481 Shares in 2006 and 15,402,391 Shares in 2005		147			154
SHARES HELD IN RABBI TRUST AT COST 168,961 Shares in 2006 and 170,488 Shares in 2005		(1,786	)		(1,577	)
DEFERRED COMPENSATION OBLIGATION		1,786			1,577
ADDITIONAL PAID IN CAPITAL		60,181			59,700
RETAINED EARNINGS		175,146			175,284
ACCUMULATED OTHER COMPREHENSIVE (LOSS) NET OF TAX (Notes 1 and 16)		(5,691	)		(6,986	)
TOTAL STOCKHOLDERS’ EQUITY		229,783			228,152
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,828,919		$	3,041,685

The accompanying notes are an integral part of these consolidated financial statements.

65

CONSOLIDATED STATEMENTS OF INCOME

	Years Ended December 31,
	2006			2005		2004
	(Dollars in thousands, except per share data)
INTEREST INCOME
Interest on Loans (Notes 1 and 5)	$	136,387		$	121,241	$	100,230
Taxable Interest and Dividends on Securities (Note 4)		27,271			31,223		31,597
Non-taxable Interest and Dividends on Securities (Note 4)		2,521			2,682		2,769
Interest on Federal Funds Sold and Short-Term Investments		1,514			515		17
Total Interest Income		167,693			155,661		134,613
INTEREST EXPENSE
Interest on Deposits		40,793			25,758		18,925
Interest on Borrowings (Note 8)		24,245			24,060		17,872
Total Interest Expense		65,038			49,818		36,797
Net Interest Income		102,655			105,843		97,816
PROVISION FOR LOAN LOSSES (Notes 1 and 5)		2,335			4,175		3,018
Net Interest Income After Provision For Loan Losses		100,320			101,668		94,798
NON-INTEREST INCOME
Service Charges on Deposit Accounts		14,233			13,103		12,345
Investment Management Services		6,128			5,287		4,683
Mortgage Banking Income		2,699			3,155		2,763
BOLI Income (Note 13)		3,259			1,831		1,902
Net Loss/Gain on Sales of Securities (Note 4)		(3,161	)		616		1,458
Gain on Branch Sale		—			—		1,756
Other Non-Interest Income		3,486			3,281		3,448
Total Non-Interest Income		26,644			27,273		28,355
NON-INTEREST EXPENSES
Salaries and Employee Benefits (Note 13)		47,890			47,912		44,899
Occupancy and Equipment Expenses (Notes 6 and 16)		10,060			10,070		8,894
Data Processing & Facilities Management		4,440			4,091		4,474
Advertising Expense		1,364			1,959		2,447
Telephone Expense		1,298			1,385		1,777
Consulting Expense		895			794		1,701
Recovery on WorldCom Bond Claim		(1,892	)		—		—
Merger and Acquisition Expense		—			—		684
Other Non-Interest Expenses (Note 14)		15,299			14,404		12,815
Total Non-Interest Expenses		79,354			80,615		77,691
Minority Interest Expense (Note 8)		—			—		1,072
INCOME BEFORE INCOME TAXES		47,610			48,326		44,390
PROVISION FOR INCOME TAXES (Notes 1 and 11)		14,759			15,121		13,623
NET INCOME	$	32,851		$	33,205	$	30,767
BASIC EARNINGS PER SHARE	$	2.20		$	2.16	$	2.06
DILUTED EARNINGS PER SHARE	$	2.17		$	2.14	$	2.03
Weighted average common shares (Basic) (Notes 1, 2 and 9)		14,938,095			15,378,187		14,963,155
Common stock equivalents		171,778			143,728		191,273
Weighted average common shares (Diluted) (Notes 1, 2 and 9)		15,109,873			15,521,915		15,154,428

The accompanying notes are an integral part of these consolidated financial statements.

66

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

																								Accumulated
	Common												Shares			Deferred		Additional						Other
	Shares			Treasury			Common			Treasury			Held in			Compensation		Paid-in			Retained			Comprehensive
	Outstanding			Shares			Stock			Stock			Rabbi Trust			Obligation		Capital			Earnings			Income/(Loss)			Total
	(Dollars in thousands, except per share data)
BALANCE DECEMBER 31, 2003		14,863,821			(235,667	)		149			(3,685	)		(1,281	)	$	1,281	$	42,292		$	129,760		$	3,331		$	171,847
Net Income																						30,767						30,767
Cash Dividends Declared ($0.56 per share)																						(8,397	)					(8,397	)
Proceeds From Exercise of Stock Options (Note 2)		41,457			69,722						1,091								14			703						1,808
Tax Benefit on Stock Option Exercise																			247									247
Common Stock Issued for Acquisition (Note 12)		586,903						6											16,862									16,868
Change in Fair Value of Derivatives During Period, Net of Tax, and Realized Gains (Notes 1 and 16)																									(135	)		(135	)
Deferred Compensation Obligation (Note 13)														(147	)		147											—
Change in Unrealized Gain on Securities Available For Sale, Net of Tax and Realized Gains (Note 4)																									(2,262	)		(2,262	)
Elimination of Treasury Stock Due to Change in Massachusetts Law (Note 1)		(165,945	)		165,945			(2	)		2,594											(2,592	)					—
BALANCE DECEMBER 31, 2004		15,326,236			—			153			—			(1,428	)	$	1,428	$	59,415		$	150,241		$	934		$	210,743
Net Income																						33,205						33,205
Cash Dividends Declared ($0.60 per share)																						(9,233	)					(9,233	)
Proceeds From Exercise of Stock Options (Note 2)		76,155						1														1,071						1,072
Tax Benefit on Stock Option Exercise																			282									282
Equity Based Compensation (Notes 1 and 2)																			3									3
Change in Fair Value of Derivatives During Period, Net of Tax, and Realized Gains (Notes 1 and 16)																									870			870
Deferred Compensation Obligation (Note 13)														(149	)		149											—
Change in Unrealized Gain on Securities Available For Sale, Net of Tax and Realized Gains (Note 4)																									(8,790	)		(8,790	)
BALANCE DECEMBER 31, 2005		15,402,391			—			154			—			(1,577	)	$	1,577	$	59,700		$	175,284		$	(6,986	)	$	228,152
Net Income																						32,851						32,851
Cash Dividends Declared ($0.64 per share)																						(9,514	)					(9,514	)
Purchase of Common Stock		(800,000	)					(8	)													(24,818	)					(24,826	)
Proceeds From Exercise of Stock Options (Note 2)		82,118						1														1,343						1,344
Tax Benefit Related to Equity Award Activity (Note 2)																			326									326
Equity Based Compensation (Notes 1 and 2)																			159									159
Restricted Shares Issued (Notes 1 and 2)		1,972																	(4	)								(4	)
Change in Fair Value of Derivatives During Period, Net of Tax, and Realized Gains (Notes 1 and 16)																									(909	)		(909	)
Deferred Compensation Obligation (Note 13)														(209	)		209											—
Amounts not yet recognized as a component of net periodic post retirement cost (Note 13)																									(413	)		(413	)
Change in Unrealized Gain on Securities Available For Sale, Net of Tax and Realized Gains (Note 4)																									2,617			2,617
BALANCE DECEMBER 31, 2006		14,686,481			—			147			—			(1,786	)	$	1,786	$	60,181		$	175,146		$	(5,691	)	$	229,783

The accompanying notes are an integral part of these consolidated financial statements.

67

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Years Ended December 31,
	2006			2005			2004
	(Dollars in thousands)
Net Income	$	32,851		$	33,205		$	30,767
Other Comprehensive Gain/(Loss), net of tax:
Increase/(decrease) in unrealized gains on securities available for sale, net of tax of $586, $5,089 and $1,014, respectively		649			(8,404	)		(1,631	)
Less: reclassification adjustment for realized losses/(gains) included in net earnings, net of tax of $1,193, $230 and $366, respectively		1,968			(386	)		(631	)
Net change in unrealized gain on securities available for sale, net of tax of $1,779, $5,321 and $1,380, respectively		2,617			(8,790	)		(2,262	)
(Decrease)/increase in fair value of derivatives during the period, net of tax of $250, $1,017 and $605, respectively		(345	)		1,405			1,095
Less: reclassification of realized gains on derivatives, net of tax of $408, $388 and $890, respectively		(564	)		(535	)		(1,230	)
Net change in fair value of derivatives, net of tax of $658, $629 and $285, respectively		(909	)		870			(135	)
Other Comprehensive Gain/(Loss), net of tax:		1,708			(7,920	)		(2,397	)
Comprehensive Income	$	34,559		$	25,285		$	28,370

The accompanying notes are an integral part of these consolidated financial statements.

68

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2006			2005			2004
	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	32,851		$	33,205		$	30,767
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED FROM OPERATING ACTIVITIES:
Depreciation and amortization		5,918			5,890			5,785
Provision for loan losses		2,335			4,175			3,018
Deferred income tax expense (benefit)		1,002			(2,291	)		(460	)
Loans originated for resale		(175,767	)		(192,808	)		(153,298	)
Proceeds from mortgage loan sales		170,337			200,140			144,610
Gain on sale of mortgages		(1,408	)		(1,420	)		(774	)
Proceeds from Bank Owned Life Insurance		(1,316	)		—			—
Net loss (gain) on sale of investments		3,161			(616	)		(1,458	)
Gain on branch sale		—			—			(1,756	)
Other Real Estate Owned		(190	)		—			—
Loss recorded from mortgage servicing rights, net of amortization		453			399			378
Stock based compensation expense		159			3			—
Tax benefit from stock option exercises		—			282			247
Changes in assets and liabilities:
Decrease (increase) in other assets		932			(3,544	)		(5,768	)
(Decrease) increase in other liabilities		(5,118	)		2,276			(2,055	)
TOTAL ADJUSTMENTS		498			12,486			(11,531	)
NET CASH PROVIDED FROM OPERATING ACTIVITIES		33,349			45,691			19,236
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and principal repayments of Securities Held to Maturity		27,088			3,534			14,791
Proceeds from maturities, principal repayments and sales of Securities Available For Sale		173,332			216,104			187,341
Purchase of Securities Held to Maturity		—			—			(1,000	)
Purchase of Securities Available For Sale		(8,525	)		(131,818	)		(343,728	)
Sale (purchase) of Federal Home Loan Bank Stock		7,577			(874	)		(5,628	)
Net increase in Loans		20,578			(133,095	)		(229,957	)
Investment in Bank Premises and Equipment		(4,189	)		(5,395	)		(4,788	)
Cash used for Merger and Acquisition, net of cash acquired		—			107			31,900
Net liabilities sold in branch sale transaction		—			—			(8,202	)
NET CASH PROVIDED FROM (USED IN) INVESTING ACTIVITIES		215,861			(51,437	)		(359,271	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Time Deposits		38,071			79,868			(48,794	)
Net (decrease) increase in Other Deposits		(153,221	)		65,391			199,799
Net (decrease) increase in Federal Funds Purchased and Assets Sold Under Repurchase Agreements		(5,087	)		51,802			22,108
Net (decrease) increase in Federal Home Loan Bank Borrowings		(112,349	)		(120,442	)		164,064
Net (decrease) increase in Treasury Tax & Loan Notes		(2,499	)		1,289			(683	)
Redemption of Junior Subordinated Debentures		(25,773	)		—			—
Issuance of Junior Subordinated Debentures		51,547			—			—
Amortization/write-off of issuance costs		1,083			88			87
Proceeds from exercise of stock options		1,344			1,072			1,808
Restricted shares issued		(4	)		—			—
Excess tax benefit from stock option exercises		326			—			—
Payments for purchase of common stock		(24,826	)		—			—
Dividends Paid		(9,482	)		(9,067	)		(8,153	)
NET CASH (USED IN) PROVIDED FROM FINANCING ACTIVITIES		(240,870	)		70,001			330,236
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		8,340			64,255			(9,799	)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR		129,951			65,696			75,495
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	$	138,291		$	129,951		$	65,696
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest on deposits and borrowings	$	63,957		$	48,810		$	36,721
Interest on shares subject to mandatory redemption		—			—			1,051
Income taxes		15,081			12,454			14,239
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Change in fair value of derivatives, net of tax	$	(909	)	$	870		$	(135	)
Change in fair value of securities available for sale, net of tax		2,617			(8,790	)		(2,262	)
Items not yet recognized as a component of net periodic post retirement cost, net of tax		(413	)		—			—
Issuance of shares from treasury stock for the exercise of stock options		—			—			1,091
In conjunction with the purchase acquisition detailed in Note 12 to the Consolidated Financial Statements, assets were acquired and liabilities were assumed as follows:
Fair value of assets acquired		—		$	(107	)	$	158,438
Fair value of liabilities assumed		—			—			141,570

The accompanying notes are an integral part of these consolidated financial statements.

69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

Independent Bank Corp. (the “Company”) is a state chartered, federally registered bank holding company headquartered in Rockland, Massachusetts incorporated in 1985. The Company is the sole stockholder of Rockland Trust Company (“Rockland” or “the Bank”), a Massachusetts trust company chartered in 1907. During 2006 the Company was also the sponsor of Delaware statutory trusts named Independent Capital Trust III (“Trust III”), Independent Capital Trust IV (“Trust IV”), and Independent Capital Trust V (“Trust V”), which had each been formed to issue trust preferred securities.

The proceeds which the Company derived from Trust V were used on December 31, 2006 to redeem all of the outstanding trust preferred securities of Trust III, which has since been dissolved. The Company also intends to use the proceeds derived from Trust V to redeem all of the outstanding trust preferred securities of Trust IV when they are first callable on April 30, 2007. Trust III, Trust IV, and Trust V are not included in the Company’s consolidated financial statements (see Note 8, “Borrowings” hereof).

As of December 31, 2006 the Bank had the following corporate subsidiaries, all of which were wholly-owned by the Bank and were included in the Company’s consolidated financial statements:

•  Four Massachusetts security corporations, namely Rockland Borrowing Collateral Securities Corp., Rockland IMG Collateral Securities Corp., Rockland Deposit Collateral Securities Corp., and Taunton Avenue Securities Corp., which hold securities, loans, industrial development bonds and other qualifying assets, and;

•  Rockland Trust Community Development Corporation (the “Parent CDE”) which, in turn, has two wholly-owned corporate subsidiaries named Rockland Trust Community Development LLC (“RTC CDE I”) and Rockland Trust Community Development Corporation II (“RTC CDE II”). The Parent CDE, CDE I, and CDE II were all formed to qualify as community development entities under federal New Markets Tax Credit Program criteria.

During 2006 the Bank also had wholly-owned subsidiaries named RTC Securities Corp., RTC Securities Corp. X, and Taunton Avenue Inc. that were dissolved prior to the end of 2006.

All material intercompany balances and transactions have been eliminated in consolidation. When necessary, certain amounts in prior year financial statements have been reclassified to conform to the current year’s presentation.

Nature of Operations

Independent Bank Corp. is a one-bank holding company whose primary asset is its investment in Rockland Trust Company. Rockland is a state-chartered commercial bank, which operates 52 retail branches, 50 full service branches, nine commercial banking centers, three investment management group offices and four residential lending centers, all of which are located in the Plymouth, Barnstable, Norfolk and Bristol counties of southeastern Massachusetts and Cape Cod. Rockland’s deposits are insured by the Federal Deposit Insurance Corporation, subject to regulatory limits. The Company’s primary source of income is from providing loans to individuals and small-to-medium sized businesses in its market area.

Uses of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could vary from these estimates. Material estimates that are particularly susceptible to significant changes in the near-term relate to the

70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

determination of the allowance for loan losses, income taxes, and valuation of goodwill and other intangibles and their respective analysis of impairment.

Significant Concentrations of Credit Risk

Most of the Company’s activities are with customers located within Massachusetts. Notes 3 and 4 discuss the types of securities in which the Company invests. Note 5 hereof discusses the types of lending in which the Company engages. The Company believes that it does not have any significant concentrations in any one industry or customer.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold and assets purchased under resale agreements. Generally, federal funds are sold for up to two week periods.

Securities

Securities that are held principally for resale in the near-term and assets used to fund certain non-qualified executive retirement obligations, which are held in the form of Rabbi Trusts, are recorded as trading assets at fair value with changes in fair value recorded in earnings. Interest and dividends are included in net interest income. Quoted market prices, when available, are used to determine the fair value of trading instruments. If quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of instruments with similar characteristics, or discounted cash flows. At December 31, 2006 and 2005, all assets classified in the trading account relate to the non-qualified executive retirement obligations (see Note 13, “Employee Benefits” hereof).

Debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Securities not classified as held to maturity or trading, including equity securities with readily determinable fair values, are classified as “available for sale” and recorded at fair value, with changes in fair value excluded from earnings and reported in other comprehensive income, net of the related tax.

Purchase premiums and discounts are recognized in interest income using the level yield method, which approximates the effective yield over the terms of the securities. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as impairment charges. The Company evaluates individual securities that have material fair values below cost for six months or longer to determine if the decline in fair value is other than temporary. Consideration is given to the obligor of the security, whether the security is guaranteed, the liquidity of the security, the type of security, the capital position of security issuers, and payment history of the security, amongst others when evaluating these individual securities.

When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale. Neither the Company nor the Bank engages in the active trading of investment securities, with the exception of funds managed by the Company’s investment management group and that are held within a trust to fund non-qualified executive retirement obligations (see Note 3, Trading Assets,” hereof).

Loans

Loans are carried at the principal amounts outstanding, adjusted by partial charge-offs and net deferred loan costs or fees. Interest income for commercial, business banking, real estate, and consumer loans is accrued based upon the daily principal amount outstanding except for loans on nonaccrual status.

As permitted by banking regulations, consumer loans and home equity loans past due 90 days or more continue to accrue interest. In addition, certain commercial and real estate loans that are more than 90 days past due may be kept on an accruing status if the loan is well secured and in the process of collection. As a general rule, a commercial or real estate loan more than 90 days past due with respect to principal or interest is classified as a nonaccrual loan.

71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income accruals are suspended on all nonaccrual loans and all previously accrued and uncollected interest is reversed against current income. A loan remains on nonaccrual status until it becomes current with respect to principal and interest (and in certain instances remains current for up to three months), when the loan is liquidated, or when the loan is determined to be uncollectible and is charged-off against the allowance for loan losses.

Loan fees and certain direct origination costs are deferred and amortized into interest income over the expected term of the loan using the level-yield method. When a loan is paid off, the unamortized portion of the net origination fees are recognized into interest income.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred. Loan losses are charged against the allowance when management believes the collectibility of a loan balance is doubtful. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management. It is based upon management’s systematic periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Changes in estimates are provided currently in earnings. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the institution to recognize additions to the allowance based on their judgments about information available to them at the time of their examinations.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial, commercial real estate, and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of homogeneous loans are collectively evaluated for impairment. As such, the Bank does not typically identify individual loans within these groupings for impairment evaluation and disclosure.

At December 31, 2006, impaired loans include all commercial real estate loans, and commercial and industrial loans that are on nonaccrual status and certain potential problem loans.

Loan Servicing

Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets with servicing retained. Capitalized servicing rights are reported as mortgage servicing rights and are amortized into non-interest income in proportion to, and over the period of, the estimated future servicing of the underlying financial assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment for an individual stratum is recognized through earnings within mortgage banking income, to the extent that fair value is less than the capitalized amount for the stratum.

72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Bank Premises and Equipment

Land is carried at cost. Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line half year convention method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease terms or the estimated useful lives of the improvements.

Goodwill and Core Deposit Intangibles

Goodwill is the price paid over the net fair value of the acquired businesses and is not amortized. Goodwill is evaluated for impairment at least annually using fair value techniques, including multiples of price to equity and price to earnings. The Company determined that goodwill was not impaired during 2006. Should the Company ever determine goodwill to be impaired, $34.7 million of the goodwill balance is deductible for tax purposes.

Core deposit intangibles are identifiable intangible assets which represent the premium paid for purchased deposits and are amortized over seven years using the straight line method which approximates the expected period of time of economic benefits that are realized by the Company. Core deposit intangible is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

The determination of which intangible assets have finite lives is subjective, as is the determination of the amortization period for such intangible assets.

Impairment of Long-Lived Assets Other Than Goodwill

The Company reviews long-lived assets, including premises and equipment, for impairment whenever events or changes in business circumstances indicate that the remaining useful life may warrant revision or that the carrying amount of the long-lived asset may not be fully recoverable. The Company performs undiscounted cash flow analyses to determine if impairment exists. If impairment is determined to exist, any related impairment loss is calculated based on fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

Income Taxes

Deferred income tax assets and liabilities are determined using the asset and liability (or balance sheet) method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Income taxes are allocated to each entity in the consolidated group based on its share of taxable income. Management exercises significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets, including projections of future taxable income.

Tax credits generated from limited partnerships and the New Markets Tax Credit program are reflected in earnings when realized for federal income tax purposes.

Investment Management Group

Assets held in a fiduciary or agency capacity for customers are not included in the accompanying consolidated balance sheets, as such assets are not assets of the Company. Revenue from administrative and management activities associated with these assets is recorded on an accrual basis. Assets under administration at December 31, 2006 and 2005 were $815.8 million and $680.1 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Financial Instruments

Credit related financial instruments — In the ordinary course of business, the Bank enters into commitments to extend credit, and with the exception of commitments to originate residential mortgage loans, these financial instruments are recorded when they are funded. See below for “Derivative financial instruments,” for treatment of commitments to originate residential mortgage loans.

Derivative financial instruments — As part of asset/liability management, the Bank utilizes interest rate swap agreements and interest rate caps or floors, to hedge various exposures or to modify interest rate characteristics of various balance sheet accounts. An interest rate swap is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount for a predetermined period of time from a second party. Interest rate caps and floors are agreements whereby one party agrees to pay a floating rate of interest on a notional principal amount for a predetermined period of time to a second party if certain market interest rate thresholds are realized. The assets relating to the notional principal amount are not actually exchanged.

The Company has derivatives consisting of forward sales commitments, commitments to fund loans intended for sale, interest rate swaps and interest rate caps.

All derivative instruments (including certain derivative instruments embedded in other contracts) are recorded on the balance sheet as either an asset or liability measured at its fair value. Changes in the derivative’s fair value are recognized currently in income unless specific hedge accounting criteria is met. The Company formally documents, designates and assesses the effectiveness of transactions that receive hedge accounting. If a derivative qualifies as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative are either offset against the change in the fair value of assets, liabilities, or firm commitments through earnings or are recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings. Also, when a hedged item or derivative is terminated, sold or matures, any remaining value depending on the type of hedge would be recognized in earnings either immediately or over the remaining life of the hedged item.

The Company uses interest rate swaps and interest rate caps that are recorded as derivatives. Interest rate swaps and interest rate caps are used primarily by the Company to hedge certain operational exposures resulting from changes in interest rates. Such exposures result from portions of the Company’s assets and liabilities that earn or pay interest at a fixed or floating rate. The Company measures the effectiveness of these hedges by modeling the impact on the exposures under various interest rate scenarios.

In addition, the Company enters into commitments to fund residential mortgage loans with the intention of selling them in the secondary market. The Company also enters into forward sales agreements for certain funded loans and loan commitments. The Company records unfunded commitments intended for loans held for sale and forward sales agreements at fair value with changes in fair value recorded as a component of Mortgage Banking Income. Loans originated and intended for sale in the secondary market are carried within residential loans at the lower of cost or estimated fair value in the aggregate.

Guarantees

Standby letters of credit, excluding commercial letters of credit and other lines of credit, are considered guarantees of the Bank. The Bank enters into a standby letter of credit to guarantee performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved is represented by the contractual amounts of those instruments. Under the standby letters of credit, the Bank is required to make payments to the beneficiary of the letters of credit upon request by the beneficiary so long as all performance criteria have been met. Most guarantees extend up to one year. At December 31, 2006 the maximum potential amount of future payments is $8.1 million, all of which is covered by collateral.

The collateral obtained is determined based upon management’s credit evaluation of the customer and may include cash, accounts receivable, inventory, property, plant, and equipment and income-producing real estate. The

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

majority of the Bank’s letters of credit are collateralized by cash. The recourse provisions of the agreements allow the Bank to collect the cash used to collateralize the agreement. If other business assets are used as collateral and cash is not available, the Bank creates a loan for the customer with the same criteria as its other lending activities. The fair value of the guarantees are $62,000 and $61,000 at December 31, 2006 and 2005, respectively. The fair value of these guarantees is not material and not reflected on the balance sheet.

Transfers of Financial Assets

Transfers of financial assets, typically residential mortgages for the Company, are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Earnings Per Share

Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding before any dilution during the period. Unvested restricted shares are not included in common shares outstanding. Diluted earnings per share have been calculated in a manner similar to that of basic earnings per share except that the weighted average number of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares (such as those resulting from the exercise of stock options) were issued during the period, computed using the treasury stock method.

Bank Owned Life Insurance

Bank owned life insurance (“BOLI”) represents life insurance on the lives of certain employees who have provided positive consent allowing the Bank to be the beneficiary of such policies. The Bank purchases BOLI in order to use its earnings to help offset the costs of the Bank’s benefit expenses including pre-and post-retirement employee benefits. Increases in the cash surrender value (“CSV”) of the policies, as well as death benefits received net of any CSV, are recorded in other non-interest income, and are not subject to income taxes. The CSV of the policies are recorded as assets of the Bank. The Company reviews the financial strength of the insurance carriers prior to the purchase of BOLI and annually thereafter. BOLI with any individual carrier is limited to 15% of tier one capital and BOLI in total is limited to 25% of tier one capital.

Treasury Stock

On July 1, 2004 Chapter 156D of the Massachusetts General Laws, a statute known as the Massachusetts Business Corporation Act, took effect. Chapter 156D applies to Massachusetts corporations, such as the Company, as of its effective date. One provision of Chapter 156D is designed to eliminate the concept of “treasury stock” and provides, in pertinent part, that shares a Massachusetts company reacquires after July 1, 2004 will be treated as authorized but unissued shares. The Company has, based upon this change in Massachusetts law, retroactively converted its existing treasury stock to authorized but unissued shares back to July 1, 2004 and accounted for this change, in the aggregate amount of $2.6 million, as a reduction in the Company’s common stock (at par value) and retained earnings. There was no impact to total equity. At December 31, 2004 the Company had 124,488 shares at a cost of $1.9 million previously classified as treasury stock.

Dividend Reinvestment and Stock Purchase Plan

The Company maintains a Dividend Reinvestment and Stock Purchase Plan. Under the terms of the plan, stockholders may elect to have cash dividends reinvested in newly issued shares of common stock at a 5% discount from the market price on the date of the dividend payment. Stockholders also have the option of purchasing

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additional new shares, at the full market price, up to the aggregate amount of dividends payable to the stockholder during the calendar year.

Stock-Based Compensation

Prior to January 1, 2006, the Company accounted for its stock-based plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related Interpretations, as permitted by SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”). No compensation cost was recognized for stock options in the Consolidated Statement of Income for the periods ended on or prior to December 31, 2005, as options granted under those plans had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. However, there was compensation expense recorded in the year ended December 31, 2005 related to restricted stock awards in accordance with APB 25 in the amount of approximately $3,000 before tax.

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123R for all share-based payments, using the modified-prospective transition method. Under this transition method, compensation cost recognized in the quarter and for the year ended December 31, 2006 includes: (1) compensation expense recognized over the requisite service period for all share-based awards granted prior to, but not yet fully vested, as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (2) compensation cost for all share-based awards granted on or subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. In accordance with the modified prospective transition method, the Company’s Consolidated Financial Statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123R. Upon adoption of SFAS 123R, the Company elected to retain its method of valuation for share-based awards granted using the Black-Scholes option-pricing model which was also previously used for the Company’s pro forma information required under SFAS 123. The Company is recognizing compensation expense for its awards on a straight-line basis over the requisite service period for the entire award (straight-line attribution method), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant-date fair value of the award that is vested at that time.

Recent Accounting Pronouncements

SFAS No. 155 (“SFAS 155”), “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140”   In February 2006, the FASB issued SFAS 155. SFAS 155 amends SFAS 133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”) and SFAS 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”). This Statement permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; clarifies which interest- and principal-only strips are not subject to SFAS 133; requires an evaluation of interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amends SFAS 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This SFAS is effective for all financial instruments acquired or issued after the beginning of an entity’s fiscal year that begins after September 15, 2006 and the fair value election may be applied upon adoption to hybrid financial instruments that had been bifurcated under SFAS 133 prior to the adoption of this statement. As this standard is effective for the Company beginning on January 1, 2007, if the Company were to acquire or issue financial instruments subsequent to that date the guidance in SFAS 155 would be applied and the Company will consider applying the fair value election to its hybrid financial instruments that have been bifurcated under SFAS 133. Upon adoption of SFAS 155 there will be no impact to the Company.

SFAS No. 156 (“SFAS 156”), “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140”  In March 2006, the FASB issued SFAS 156. SFAS 156 amends SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. This Statement requires an entity

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to recognize a servicing asset or servicing liability when it undertakes an obligation to service a financial asset in certain situations; requires separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable; permits an entity to choose between an amortization or fair value measurement method for each class of separately recognized servicing assets and servicing liabilities; at initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights; requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. SFAS 156 is to be adopted as of the beginning of an entity’s fiscal year that begins after September 15, 2006, with earlier adoption permitted, provided the entity has not yet issued financial statements for any period of that fiscal year. The effective date of SFAS 156 is the date an entity adopts it, and an entity should apply the requirements for recognition and initial measurement of servicing assets and servicing liabilities prospectively to all transactions after the effective date. The Company has not yet adopted SFAS 156 and is not required to do so until the Company’s fiscal year that begins on January 1, 2007. The Company does not believe that the adoption of SFAS 156 will have a material impact on the Company’s financial position.

SFAS No. 157 (“SFAS 157”), “Fair Value Measurements”  In September 2006, the FASB issued SFAS 157. SFAS 157 was issued to provide consistency and comparability in determining fair value measurements and to provide for expanded disclosures about fair value measurements. The definition of fair value maintains the exchange price notion in earlier definitions of fair value but focuses on the exit price of the asset or liability. The exit price is the price that would be received to sell the asset or paid to transfer the liability adjusted for certain inherent risks and restrictions. Expanded disclosures are also required about the use of fair value to measure assets and liabilities. The effective date is for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not believe that the adoption of SFAS 157 will have a material impact on the Company’s financial position or results of operations.

SFAS No. 158 (“SFAS 158”), “Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans — An Amendment of FASB Statements No. 87, 88, 106, and 132(R),”  In September 2006, the FASB issued SFAS 158. SFAS 158 will require companies to recognize the over-funded and under-funded status of a single employer defined benefit postretirement plan as an asset or liability in its balance sheet and to recognize changes in the funded status in comprehensive income in the year in which the change occurred. However, gains or losses, prior service costs or credits, and transition assets or obligations that have not yet been included in net periodic benefit cost as of the end of 2006, the fiscal year in which SFAS 158 is initially applied, are to be recognized as components of the ending balance of accumulated other comprehensive income, net of tax. Additionally, SFAS 158 will require companies to measure the funded status of a plan as of the date of the fiscal year-end financial statements with limited exceptions effective for fiscal years ending after December 15, 2008. The Company adopted SFAS 158 as of December 31, 2006 for its “other” post retirement plans including its supplemental executive retirement plans and its post retirement benefits plan, the effects of which can be seen within Note 13 “Employee Benefits” hereof. The Company’s pension plan falls outside the scope of SFAS 158 because it is accounted for as a multiemployer plan.

FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”  In June 2006, the FASB issued FIN 48, an interpretation of SFAS No. 109, “Accounting for Income Taxes,” in order to add clarity to the accounting for uncertainty in income taxes recognized in a Company’s financial statements. The interpretation requires that only tax positions that are more likely than not to be sustained upon a tax examination are to be recognized in a Company’s financial statements to the extent that the benefit has a greater than 50% likelihood of being recognized. The differences that arise between the amounts recognized in the financial statements and the amounts recognized in the tax return will lead to an increase or decrease in current taxes, an increase or decrease to the deferred tax asset or deferred tax liability, respectively, or both. FIN 48 is effective for fiscal years beginning after December 15, 2006 with early application encouraged if interim financial statements have not yet been issued. The adoption of FIN 48 did not have a material impact on the Company’s financial position.

Staff Accounting Bulletin (“SAB”) No. 108  In September 2006, the SEC issued SAB No. 108. SAB No. 108 was issued to provide guidance on the consideration of the effects of prior year misstatements in quantifying current

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

year misstatements for the purpose of a materiality assessment. SAB No. 108 addresses the diversity in practice in quantifying financial statement misstatements and requires companies to quantify the effects of an identified unadjusted error on each financial statement and financial statement disclosure by considering the impact of prior year misstatements on the current year financial statements. Initial application of SAB No. 108 allows companies to elect not to restate prior periods but to reflect the initial application in their annual financial statements covering the first fiscal year ending after November 15, 2006. The cumulative effect of the initial application should be reported in the carrying amounts of assets and liabilities as of the beginning of that fiscal year, and the offsetting adjustment, net of tax, should be made to the opening balance of retained earnings for that year. Companies should disclose the nature and amount of each item, when and how each error being corrected arose, and the fact that the errors were previously considered immaterial. The adoption of SAB No. 108 did not have a material impact on the Company’s financial position or results of operations because the Company had no prior year misstatements that were material to the current year’s financial statements.

Emerging Issues Task Force (“EITF”) Issue No. 06-5 (“EITF 06-5”), “Accounting for Purchases of Life Insurance — Determining the Amount That Could Be Realized in Accordance With FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance”  In Issue 06-5, a determination of the amount that could be realized under an insurance contract should (1) consider any additional amounts (beyond cash surrender value) included in the contractual terms of the policy and (2) be based on assumed surrender at the individual policy or certificate level, unless all policies or certificates are required to be surrendered as a group. When it is probable that contractual restrictions would limit the amount that could be realized, such contractual limitations should be considered. Any amounts recoverable at the insurance company’s discretion should be excluded from the amount that could be realized. Fixed amounts recoverable in excess of one year should be recorded at their present values. This EITF is effective for fiscal years beginning after December 15, 2006, and an entity should recognize the effects of applying the EITF through either (1) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets as of the beginning of the year of adoption, or (2) a change in accounting principle through retrospective application to all prior periods. The Company does not believe that the adoption of EITF 06-5 will have a material impact on the Company’s financial position.

(2) Stock Option and Restricted Stock Awards

The Company has four stock-based plans, all of which were approved by the Company’s Board of Directors and shareholders, including the 2006 Plan (as defined below), which was approved by shareholders on April 13, 2006.

•  1996 Non-Employee Directors’ Stock Option Plan (“the 1996 Plan”)

•  1997 Employee Stock Option Plan (“the 1997 Plan”)

•  2005 Employee Stock Plan (“the 2005 Plan”)

•  2006 Non-Employee Director Stock Plan (“the 2006 Plan”)

The following table presents the amount of cumulatively granted stock options and restricted stock awards, net of cancellations, through December 31, 2006.

	Authorized			Authorized					Cumulative Granted, Net of Cancellations
	Stock			Restricted					Stock		Restricted
	Option Awards			Stock Awards			Total		Option Awards		Stock Awards
1996 Plan		300,000			N/A			300,000		209,000		N/A
1997 Plan		1,100,000			N/A			1,100,000		1,071,197		N/A
2005 Plan		(1	)		(1	)		800,000		134,500		10,285
2006 Plan		(2	)		(2	)		50,000		10,000		5,200

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(1)	The Company may award up to a total of 800,000 shares as stock options or restricted stock awards.
(2)	The Company may award up to a total of 50,000 shares as stock options or restricted stock awards.

At December 31, 2006, there were no shares available for grant under the 1996 Plan due to its expiration. Under the 2006 Plan, the 2005 Plan, the 1997 Plan, and the 1996 Plan the option exercise price equals the fair market value on the date of grant. All options granted under the 1997 Plan prior to December 15, 2005 vested between six months and two years from the date of grant and have ten-year contractual terms. All options granted on December 15, 2005 under either the 2005 Plan or the 1997 Plan vested immediately and have seven-year contractual terms. All options granted in 2006 under the 2005 Plan vest between six and 28 months from the date of grant and have seven-year contractual terms. All options granted in 2006 under the 2006 Plan vest between the date of grant and approximately 21 months from the date of grant and have seven-year contractual terms. Options granted to date under all plans expire between 2007 and 2015. The Company issues shares for option exercises and restricted stock issuances from its pool of authorized but unissued shares.

On December 15, 2005, the Company’s Board of Directors voted to accelerate the vesting of certain unvested “out-of-the-money” stock options awarded to employees pursuant to the 1997 Plan so that they immediately vested as of December 15, 2005. No other changes were made to the terms and conditions of the stock options affected by the Board vote. The Board vote approved the acceleration and immediate vesting of all unvested options with an exercise price of $31.44 or greater per share. As a consequence of the Board vote, options to purchase 135,549 shares of the Company’s common stock became exercisable immediately. The average of the high price and low price at which the Company’s common stock traded on December 15, 2005, the date of the Board vote, was $28.895 per share. The Company estimates that, as a result of this accelerated vesting, approximately $710,000 of 2006 non-cash compensation expense and $8,000 of 2007 non-cash compensation expense were eliminated that would otherwise have been recognized in the Company’s earnings in accordance with Financial Accounting Standards Board (“FASB”) Statement No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123R”).

On December 15, 2005, the Company granted 11,450 restricted stock awards to employees from the 2005 Plan. These awards vest evenly over a five-year period assuming continued employment with the Company. The holders of these awards participate fully in the rewards of stock ownership of the Company, including voting and dividend rights. The employees are not required to pay any consideration to the Company for the restricted stock awards. The Company measured the fair value of the shares based on the average of the high price and low price at which the Company’s common stock traded on the date of the grant.

On April 18, 2006, the Company granted 5,200 restricted stock awards to non-employee directors from the 2006 Plan. These awards vest at the end of a five-year period, or earlier if the director ceases to be a director for any reason other than cause, for example, retirement. If a non-employee director is removed from the Board for cause, the Company has ninety (90) days within which to exercise a right to repurchase any unvested portion of any restricted stock award from the non-employee director for the aggregate price of One Dollar ($1.00). The holders of these awards participate fully in the rewards of stock ownership of the Company, including voting and dividend rights. The directors are not required to pay any consideration to the Company for the restricted stock awards. The Company measured the fair value of the awards based on the average of the high price and low price at which the Company’s common stock traded on the date of the grant.

The total stock-based compensation expense before tax recognized in earnings by the Company in the years ended December 31, 2006, 2005, and 2004 was approximately $159,000, $3,000, and $0, respectively. The portion of this expense related to stock option awards was approximately $67,000, $0, and $0, respectively, in the years ended December 31, 2006, 2005, and 2004. The portion of this expense related to restricted stock awards was approximately $92,000, $3,000, and $0, respectively, in the years ended December 31, 2006, 2005, and 2004. Amounts recognized due to awards issued to directors is recognized as director’s fees within other non-interest expense.

As required, prior to the adoption of SFAS 123R, the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Consolidated Statement of Cash Flows.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

SFAS 123R requires the cash flows resulting from the tax benefits from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. Therefore, the Company had $326,000 of excess tax benefits classified as a financing cash inflow during the year ended December 31, 2006.

Cash received from stock option exercises for the years ended December 31, 2006, 2005 and 2004 was approximately $1.3 million, $1.1 million, and $1.8 million, respectively. The actual tax benefit realized for the tax deductions from option exercises under all plans totaled $352,000, $282,000, and $247,000 for the years ending December 31, 2006, 2005, and 2004, respectively. No cash was used by the Company to settle equity instruments granted under share-based compensation arrangements during the year ended December 31, 2006.

For purposes of pro forma disclosures for periods prior to January 1, 2006, the estimated fair value of the stock options is amortized into expense over the vesting period of the options. The Company’s net income and earnings per share for the years ended December 31, 2005 and 2004, had the Company elected to recognize compensation expense for the granting of options under SFAS 123 using the Black-Scholes option pricing model, would have been reduced to the following pro forma amounts:

		Year Ended December 31,
		2005		2004
		(Dollars in thousands, except per share data)
Net Income:	As Reported	$	33,205	$	30,767
Less: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of tax		$	2,082	$	503
	Pro Forma	$	31,123	$	30,264
Basic EPS:
	As Reported	$	2.16	$	2.06
	Pro Forma	$	2.02	$	2.02
Diluted EPS:
	As Reported	$	2.14	$	2.03
	Pro Forma	$	2.01	$	2.00

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions used for grants under the identified plans:

•  Expected volatility is based on the standard deviation of the historical volatility of the weekly adjusted closing price of the Company’s shares for a period equivalent to the expected life of the option.

•  Expected life represents the period of time that the option is expected to be outstanding, taking into account the contractual term, historical exercise/forfeiture behavior, and the vesting period, if any.

•  Expected dividend yield is an annualized rate calculated using the most recent dividend payment at time of grant and the Company’s average trailing twelve-month daily closing stock price.

•  The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equivalent to the expected life of the option.

•  In addition, as SFAS 123R requires that the stock-based compensation expense recognized in earnings be based on the amount of awards ultimately expected to vest, a forfeiture assumption is estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense recognized in 2006 has been reduced for annualized estimated forfeitures of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5% for both restricted stock and stock option awards. Forfeitures were estimated based on historical experience.

		2006 Plan			2005 Plan			1997 Plan			1996 Plan
Expected Volatility	Fiscal Year 2006		27	%(1)		25	%(2)		N/A			N/A
	Fiscal Year 2005		N/A			25	%(3)		25%	(3)		—
						—			26%	(4)		27%	(5)
	Fiscal Year 2004		N/A			N/A			28%	(6)		—
									28%-30%	(7)		28%	(8)
Expected Lives	Fiscal Year 2006		4 years	(1)		4 years	(2)		N/A			N/A
	Fiscal Year 2005		N/A			3.5 years	(3)		3.5 years	(3)		—
						—			3.5-4 years	(4)		4.5 years	(5)
	Fiscal Year 2004		N/A			N/A			4 years	(6)		—
									3.5 years	(7)		4 years	(8)
Expected Dividend Yields	Fiscal Year 2006		2.36	%(1)		2.08	%(2)		N/A			N/A
	Fiscal Year 2005		N/A			2.04	%(3)		2.04%	(3)		—
						—			1.91%-1.95%	(4)		2.21%	(5)
	Fiscal Year 2004		N/A			N/A			1.64%	(6)		—
									1.71%-2.09%	(7)		2.02%	(8)
Risk Free Interest Rate	Fiscal Year 2006		4.87	%(1)		4.73	%(2)		N/A			N/A
	Fiscal Year 2005		N/A			4.38	%(3)		4.38%	(3)		—
						—			3.53%-3.80%	(4)		3.93%	(5)
	Fiscal Year 2004		N/A			N/A			3.35%	(6)		—
									2.64%-3.49%	(7)		3.19%	(8)

(1)	On April 18, 2006, 10,000 options were granted from the 2006 Plan to two members of the Company’s Board of Directors. The risk free rate, expected dividend yield, expected life and expected volatility for this grant were determined on April 18, 2006.
(2)	On September 7, 2006, 5,000 options were granted from the 2005 Plan to the Company’s Senior Vice President of Mortgage Operations. The risk free rate, expected dividend yield, expected life and expected volatility for this grant were determined on September 7, 2006.
(3)	On December 15, 2005, 137,000 options were granted from the 2005 Plan and 45,500 options were granted from the 1997 Plan to members of the Company’s Senior Management. The risk free rate, expected dividend yield, expected life and expected volatility for these grants were determined on December 15, 2005.
(4)	On January 13, 2005, 34,500 options were granted from the 1997 Plan to certain First Vice Presidents and Vice Presidents of the Company. Also on January 13, 2005, 5,000 options were granted to the Company’s Senior Vice President and Director of Marketing, Strategy and Analysis. The risk free rate, expected dividend yield, expected life and expected volatility for these grants were determined on January 13, 2005. On September 1, 2005, 500 options were granted from the 1997 Plan to a Vice President of the Company. The risk free rate, expected dividend yield, expected life and expected volatility for this grant were determined on September 1, 2005.
(5)	On April 26, 2005, 11,000 options were granted from the 1996 Plan to the Company’s Board of Directors. The risk free rate, expected dividend yield, expected life and expected volatility for this grant were determined on April 26, 2005.
(6)	On December 9, 2004, 175,500 options were granted from the 1997 Plan to the Company’s members of Senior Management. The risk free rate, expected dividend yield, expected life and expected volatility for this grant were determined on December 9, 2004.

81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(7)

On both January 8, 2004 and June 10, 2004, 5,000 options were granted from the 1997 Plan to the Company’s Managing Director of Business Banking. The risk free rate, expected dividend yield, expected life and expected volatility for these grants were determined on the respective grant dates. On both July 19, 2004 and October 20, 2004, 10,000 options were granted from the 1997 Plan to the Company’s Executive Vice President of Retail Banking and Corporate Marketing. The risk free rate, expected dividend yield, expected life and expected volatility for these grants were determined on the respective grant dates.

(8)

On April 27, 2004, 11,000 options were granted from the 1996 Plan to the Company’s Board of Directors. The risk free rate, expected dividend yield, expected life and expected volatility for this grant were determined on April 27, 2004.

A summary of the status of all the Company’s Plans for the year ended December 31, 2006 is presented in the table below:

	Summary Status of All Plans
	Year Ended December 31, 2006
				Weighted		Wtd Avg.		Aggregate					Weighted
				Average		Remaining		Intrinsic					Average
				Exercise		Contractual		Value		Restricted Stock			Grant
	Stock Options			Price ($)		Term (Years)		($000)		Awards			Price ($)
Balance at January 1, 2006		950,390		$	25.67						11,450		$	28.90
Granted		15,000		$	32.50						5,200		$	32.23
Exercised		(84,718	)	$	16.87						—		$	—
Released		n/a			n/a						(2,085	)	$	28.90
Forfeited		(166	)	$	30.84						(1,165	)	$	28.90
Expired		(35,411	)	$	31.54						—		$	—
Balance at December 31, 2006		845,095		$	26.43		6.0	$	8,424		13,400		$	30.19
Options Exercisable at December 31, 2006		833,429		$	26.35		6.0	$	8,380		n/a			n/a

	Year Ended December 31,
	2006		2005		2004
Weighted average grant date fair value of options granted ($ per share)	$	7.32	$	6.08	$	7.22
Total intrinsic value of share options exercised	$	841,000	$	671,000	$	588,000

The aggregate intrinsic value in the preceding tables represents the total pre-tax intrinsic value, based on the average of the high price and low price at which the Company’s common stock traded on December 29, 2006 (the last trading day of the calendar year) of $36.40, which would have been received by the option holders had they all exercised their options as of that date.

82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the status of the Non-Employee Director Plans as of December 31, 2006 and changes during the year then ended is presented in the table below:

	Non-Employee Director Plans
	Year Ended December 31, 2006
	1996 Plan					2006 Plan
				Weighted		Stock		Weighted
				Average		Options		Average
	Stock			Exercise		and		Exercise
	Options			Price		Awards		Price
Balance at January 1, 2006		98,000		$	18.96		—	$	—
Granted Options		—		$	—		10,000	$	32.23
Restricted Stock Awards		n/a			n/a		5,200	$	32.23
Exercised		(14,000	)	$	9.51		—	$	—
Forfeited		—		$	—		—	$	—
Expired		—		$	—		—	$	—
Outstanding at December 31, 2006		84,000		$	20.54		15,200	$	32.23
Options Exercisable at December 31, 2006		84,000		$	20.54		3,334	$	32.23

A summary of the status of the Company’s nonvested awards under all Plans as of December 31, 2006 and changes during the year then ended is presented in the table below:

	Nonvested Awards Issued Under All Plans
	Year Ended December 31, 2006
	Stock Options							Restricted Stock Awards
				Weighted							Weighted
				Average							Average
				Grant Date							Grant Date
	Awards			Fair Value				Awards			Fair Value
Nonvested at January 1, 2006		37,849		$	6.64				11,450		$	28.90
Granted		15,000		$	7.32				5,200		$	32.23
Vested		(39,201	)	$	6.70				(2,085	)	$	28.90
Expired		(1,816	)	$	6.73				—		$	—
Forfeited		(166	)	$	6.29				(1,165	)	$	28.90
Nonvested at December 31, 2006		11,666		$	7.33				13,400		$	30.19
Unrecognized compensation cost, including forfeiture estimate						$	51,000						$	323,000
Weighted average remaining recognition period (years)							1.4							3.7

The total fair value of stock options that vested during the years ended December 31, 2006, 2005, and 2004 was $262,000, $3.3 million, and $1.7 million, respectively. The total fair value of restricted stock awards that vested was $60,000 during the year ended December 31, 2006 and $0 during both 2005 and 2004.

The Company has individual stock option agreement forms for its Chief Executive Officer and for all other officers who have been designated Executive Officers of the Company and/or Rockland Trust Company in Securities Exchange Commission filings. Those form stock option agreements include a provision that requires any unvested options that vest upon a Change of Control and that would become an event described in Section 280G of the Internal Revenue Code of 1986 will be cashed out at the difference between the deal price of the acquisition and the exercise price of the option.

83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(3)  Trading Assets

Trading assets, at fair value, consist of the following:

	At December 31,
	2006		2005
	Fair Value
	(Dollars in thousands)
Cash Equivalents	$	47	$	15
Fixed Income Securities		331		349
Marketable Equity Securities		1,380		1,193
Total	$	1,758	$	1,557

The Company realized a gain on trading activities of $86,000 in 2006, $60,000 in 2005, and $113,000 in 2004. The trading assets are held for funding non-qualified executive retirement obligations (see Note 13, “Employee Benefits” hereof). Trading assets are recorded at fair value with changes in fair value recorded in earnings.

(4)  Securities

The amortized cost, gross unrealized gains and losses, and fair value of securities held to maturity at December 31, 2006 and 2005 were as follows:

	2006								2005
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses			Value
	(Dollars in thousands)								(Dollars in thousands)
Mortgage-Backed Securities	$	5,526	$	41	$	—	$	5,567	$	6,936	$	65	$	—		$	7,001
State, County, and Municipal Securities		35,046		778		—		35,824		41,628		1,180		—			42,808
Corporate Debt Securities		36,175		472		—		36,647		55,704		1,447		(230	)		56,921
Total	$	76,747	$	1,291	$	—	$	78,038	$	104,268	$	2,692	$	(230	)	$	106,730

The amortized cost, gross unrealized gains and losses, and fair value of securities available for sale at December 31, 2006 and 2005 were as follows:

84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2006									2005
			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
	(Dollars in thousands)									(Dollars in thousands)
U.S. Treasury and U.S. Government Agency Securities	$	89,398	$	—	$	(1,545	)	$	87,853	$	154,615	$	—	$	(3,362	)	$	151,253
Mortgage-Backed Securities		218,510		472		(5,986	)		212,996		263,289		820		(6,577	)		257,532
Collateralized Mortgage Obligations		91,583		—		(2,685	)		88,898		155,307		—		(4,985	)		150,322
State, County, and Municipal Securities		19,109		—		(293	)		18,816		22,743		—		(334	)		22,409
Corporate Debt Securities		8,525		—		—			8,525		—		—		—			—
Total	$	427,125	$	472	$	(10,509	)	$	417,088	$	595,954	$	820	$	(15,258	)	$	581,516

The Bank realized no gross gains in 2006, and gross gains of $792,000 and $1.5 million, in 2005 and 2004, respectively. Realized gross losses were $3.2 million in 2006, $176,000 in 2005, and none in 2004. Cash proceeds on the sale of securities were $101.8 million, $63.5 million, and $12.0 million, for 2006, 2005 and 2004, respectively.

A schedule of the contractual maturities of securities held to maturity and securities available for sale as of December 31, 2006 is presented below.

	Held to Maturity				Available for Sale
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value
	(Dollars in thousands)				(Dollars in thousands)
Due in one year or less	$	38	$	38	$	19,896	$	19,706
Due from one year to five years		2,892		2,928		88,716		87,067
Due from five to ten years		15,284		15,569		87,230		85,477
Due after ten years		58,533		59,503		231,283		224,838
Total	$	76,747	$	78,038	$	427,125	$	417,088

The actual maturities of mortgage-backed securities, collateralized mortgage obligations and corporate debt securities will differ from the contractual maturities, due to the ability of the issuers to prepay underlying obligations. At December 31, 2006, the Bank has $77.6 million of callable securities in its investment portfolio.

On December 31, 2006 and 2005, investment securities carried at $201.3 million and $146.1 million, respectively, were pledged to secure public deposits, assets sold under repurchase agreements, treasury tax and loan notes, letters of credit, interest rate derivatives and for other purposes as required by law. Additionally, $234.2 million and $420.3 million of securities were pledged to the Federal Home Loan Bank (“FHLB”) at December 31, 2006 and 2005, respectively.

At year-end 2006 and 2005, the Company had no investments in obligations of individual states, counties, or municipalities, which exceed 10% of stockholders’ equity.

85

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Than Temporarily Impaired Securities

The following tables show the gross unrealized losses and fair value of the Company’s investments with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2006 and 2005.

	At December 31, 2006
	Less Than 12 Months					12 Months or Longer					Total
	Fair		Unrealized					Unrealized					Unrealized
Description of Securities	Value		Losses			Fair Value		Losses			Fair Value		Losses
	(Dollars in thousands)
U.S. Treasury Obligations and Direct Obligation of U.S. Government Agencies	$	—	$	—		$	87,853	$	(1,545	)		$87,853	$	(1,545	)
All Mortgage Backed Securities		119		(1	)		287,897		(8,670	)		288,016	$	(8,671	)
Corporate Bonds		—		—			—		—			—		—
City, State, and Local Municipal Bonds		—		—			18,817		(293	)		18,817		(293	)
Total Temporarily Impaired Securities	$	119	$	(1	)	$	394,567	$	(10,508	)		$394,686	$	(10,509	)

	At December 31, 2005
	Less Than 12 months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized
Description of Securities	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
	(Dollars in thousands)
U.S. Treasury Obligations and Direct Obligation of U.S. Government Agencies	$	97,392	$	(1,866	)	$	53,861	$	(1,496	)		$151,253	$	(3,362	)
All Mortgage Backed Securities		144,620		(2,945	)		244,968		(8,617	)		389,588		(11,562	)
Corporate Bonds		—		—			2,891		(230	)		2,891		(230	)
City, State, and Local Municipal Bonds		15,473		(210	)		3,536		(124	)		19,009		(334	)
Total Temporarily Impaired Securities	$	257,485	$	(5,021	)	$	305,256	$	(10,467	)		$562,741	$	(15,488	)

At December 31, 2006, the Bank had securities of $394.7 million with $10.5 million of unrealized losses on these securities. Of these securities, $119,000, with losses of $1,000, have been at a loss position for less than 12 months and $394.6 million of these securities, with losses of $10.5 million, have been at a loss position for longer than 12 months. The Bank believes that these securities are only temporarily impaired and that the full principal will be collected as anticipated.

Of the total, $87.9 million, or 22.2%, are direct obligations of U.S. Government Agencies and are at a loss position because they were acquired when the general level of interest rates were lower than that on December 31, 2006. As of December 31, 2006, $288.0 million or 73.0% are U.S. Government or agency mortgage backed securities. The majority of the mortgage backed securities are also at a loss because they were purchased during a lower interest rate environment. Also, at December 31, 2006, $18.8 million, or the remaining 4.8% are municipal bonds which are insured by an AAA rated agency and are also at a loss because of the interest rate environment at the time of purchase.

Because the declines in market value of investments are attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be until maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2006.

86

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(5)  Loans and Allowance for Loan Losses

The vast majority of the Bank’s lending activities are conducted in the Commonwealth of Massachusetts. The Bank originates commercial and residential real estate loans, commercial and industrial loans, business banking and consumer home equity, auto, and other loans for its portfolio. The Bank considers a concentration of credit to a particular industry to exist when the aggregate credit exposure to a borrower, an affiliated group of borrowers or a non-affiliated group of borrowers engaged in one industry exceeds 10% of the Bank’s loan portfolio which includes direct, indirect or contingent obligations. At December 31, 2006, loans made by the Company to the industry concentration of lessors of non-residential buildings grew to 10.5% of the Company’s total loan portfolio.

The composition of loans at December 31, 2006 and 2005 were as follows:

	2006		2005
	(Dollars in thousands)
Commercial and Industrial	$	174,356	$	155,081
Commercial Real Estate		740,517		683,240
Commercial Construction		119,685		140,643
Business Banking		59,910		51,373
Residential Real Estate		378,368		428,343
Residential Construction		7,277		8,316
Residential Loans Held for Sale		11,859		5,021
Consumer — Home Equity		277,015		251,852
Consumer — Auto		206,845		263,179
Consumer — Other		49,077		53,760
Loans	$	2,024,909	$	2,040,808

Net deferred fees included in loans at December 31, 2006 and December 31, 2005 were $3.3 million and $2.3 million, respectively.

In addition to the loans noted above, at December 31, 2006 and 2005 the Company serviced approximately $292.9 million and $336.5 million, respectively, of loans sold to investors in the secondary mortgage market and other financial institutions.

At December 31, 2006 and 2005, loans held for sale amounted to approximately $11.9 million and $5.0 million, respectively. The Company has derivatives consisting of forward sales contracts and commitments to fund loans intended for sale. Forward loan sale contracts and the commitments to fund loans intended for sale are recorded at fair value. This change in fair value resulted in an increase in earnings of $67,000 in 2006 and a decrease in earnings of $16,000 in 2005.

As of December 31, 2006 and 2005, the Bank’s recorded investment in impaired loans and the related valuation allowance was as follows:

	At December 31,
	2006				2005
	Recorded		Valuation		Recorded		Valuation
	Investment		Allowance		Investment		Allowance
	(Dollars in thousands)
Impaired loans:
Valuation allowance required	$	683	$	414	$	1	$	1
No valuation allowance required		2,953		—		557		—
Total	$	3,636	$	414	$	558	$	1

87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The valuation allowance is included in the allowance for loan losses on the consolidated balance sheet. The average recorded investment in impaired loans for the years ended December 31, 2006 and 2005 was $3.3 million and $1.6 million, respectively. Interest payments received on impaired loans are recorded as interest income unless collection of the remaining recorded investment is doubtful, at which time payments received are recorded as reductions of principal.

At December 31, 2006 and 2005, accruing loans 90 days or more past due totaled $389,000 and $227,000, respectively, and nonaccruing loans totaled $6.6 million and $3.1 million respectively. Gross interest income that would have been recognized for the years ended December 31, 2006, 2005 and 2004, if nonperforming loans at the respective dates had been performing in accordance with their original terms, approximated $146,000, $282,000, and $312,000, respectively. The actual amount of interest that was collected on these loans during each of those periods and included in interest income was approximately $225,000, $103,000, and $140,000, respectively. There were no commitments to advance additional funds to borrowers whose loans are on nonaccrual.

The aggregate amount of all loans outstanding to directors, principal officers, and principal security holders at December 31, 2006 and 2005 were $28.7 million and $22.4 million, respectively.

All such loans were made in the ordinary course of business on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with other persons, and do not involve more than the normal risk of collectibility or present other unfavorable features.

An analysis of the total allowance for loan losses for each of the three years ending December 31, 2006, 2005, and 2004 are as follows:

	2006			2005			2004
	(Dollars in thousands)
Allowance for loan losses, beginning of year	$	26,639		$	25,197		$	23,163
Loans charged off		(3,180	)		(3,474	)		(2,599	)
Recoveries on loans previously charged off		1,021			741			745
Net charge-offs		(2,159	)		(2,733	)		(1,854	)
Provision charged to expense		2,335			4,175			3,018
Allowance related to business combinations		—			—			870
Allowance for loan losses, end of year	$	26,815		$	26,639		$	25,197

(6) Bank Premises and Equipment

Bank premises and equipment at December 31, 2006 and 2005 were as follows:

							Estimated
	2006			2005			Useful Life
	(Dollars in thousands)						(In years)
Cost:
Land	$	5,548		$	5,488			N/A
Bank Premises		30,207			29,256			5-39
Leasehold Improvements		10,338			10,414			5-15
Furniture and Equipment		27,421			25,339			3-7
Total Cost		73,514			70,497
Accumulated Depreciation		(36,198	)		(33,066	)
Net Bank Premises and Equipment	$	37,316		$	37,431

88

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Depreciation expense related to bank premises and equipment was $4.3 million in 2006, $4.4 million in 2005, and $4.2 million in 2004.

(7) Deposits

The following is a summary of original maturities of time deposits as of December 31, 2006:

	Balance of
	Time Deposits
	Maturing		Percent
	(Dollars in thousands)
1 year or less	$	525,109		93	%
Over 1 year to 2 years		28,531		5	%
Over 2 years to 3 years		6,154		1	%
Over 3 years		7,334		1	%
Total	$	567,128		100	%

(8) Borrowings

Short-term borrowings consist of federal funds purchased, assets sold under repurchase agreements, FHLB borrowings, and treasury tax and loan notes that are due within one year. Information on the amounts outstanding and interest rates of short-term borrowings for each of the two years in the period ended December 31 are as follows:

	2006			2005			2004
	(Dollars in thousands)
Balance outstanding at end of year	$	246,202		$	303,787		$	65,696
Average daily balance outstanding		248,812			294,286			64,287
Maximum balance outstanding at any month end		291,554			370,213			103,031
Weighted average interest rate for the year		4.23	%		3.00	%		0.94	%
Weighted average interest rate at end of year		4.19	%		3.09	%		1.18	%

At December 31, 2006 and 2005, the Bank had $774.5 million and $1.1 billion, respectively, of assets pledged as collateral against borrowings.

The Bank has established two lines of credit each one for $10.0 million, neither of which was outstanding at December 31, 2006 or 2005. The Bank has established repurchase agreements with major brokerage firms. Borrowings under these agreements are classified as assets sold under repurchase agreements. Both wholesale and retail repurchase agreements are collateralized by mortgage-backed securities and U.S. Government obligations. At December 31, 2006, the Company had $25.0 million of securities repurchase agreements outstanding with third party brokers. The Company pays a 3 month LIBOR rate of interest minus 75 basis points through May 18, 2007 at which time the Company pays a fixed rate of 4.45% until May 18, 2010, which is its maturity date. The repurchase agreement is callable quarterly from May 18, 2007 until May 18, 2010. In addition to these agreements, the Bank has entered into similar agreements with certain customers. At December 31, 2006 and 2005, the Bank had $83.2 million and $88.3 million, respectively, of customer repurchase agreements outstanding. The related securities are included in securities available for sale.

FHLB borrowings are collateralized by a blanket pledge agreement on the Bank’s FHLB stock, certain qualified investment securities, deposits at the Federal Home Loan Bank, and residential mortgages held in the Bank’s portfolio and certain commercial real estate loans. The Bank’s available borrowing capacity at the Federal Home Loan Bank was approximately $198.7 million at December 31, 2006. In addition, the Bank has a $5.0 million

89

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

line of credit with the FHLB, none of which is outstanding at December 31, 2006. A schedule of the maturity distribution of FHLB advances with the weighted average interest rates at December 31, 2006 and 2005 follows:

	2006					2005
			Weighted					Weighted
			Average					Average
	Amount		Rate			Amount		Rate
	(Dollars in thousands)
Due in one year or less	$	160,003		5.32	%	$	210,118		4.26	%
Due in greater than one year to five years		95,012		4.32	%		87,243		4.35	%
Due in greater than five years		50,113		4.89	%		120,116		4.73	%
Total	$	305,128		4.94	%	$	417,477		4.42	%

Of the $160.0 million outstanding at year-end, and due in one year or less, $60.0 million of these borrowings are hedged by interest rate swaps to fix the rate of interest at 2.49% on $25.0 million through January 21, 2007 and 4.06% on $35.0 million through January 10, 2010. Also, an additional $100.0 million of these borrowings are hedged by an interest rate cap to cap the rate of interest at 4.00% through January 31, 2008.

Also included as long term borrowings on the Company’s balance sheet are junior subordinated debentures payable to the Company’s unconsolidated special purpose entities, which were Trust IV and Trust V at December 31, 2006, that issued trust preferred securities.

Junior Subordinated Debentures were $77.3 million and $51.5 million at December 31, 2006 and 2005, respectively.

On December 11, 2001, Independent Capital Trust III was formed for the purpose of issuing 1.0 million Trust III Preferred Securities and investing the proceeds of the sale of these securities in $25.8 million of 8.625% junior subordinated debentures issued by the Company. A total of $25.0 million of 8.625% Trust III Preferred Securities were issued by Trust III and were scheduled to mature in 2031, callable at the option of the Company on or after December 31, 2006. Distributions on these securities were paid quarterly in arrears on the last day of March, June, September, and December, such distributions can be deferred at the option of the Company for up to five years. The Trust III Preferred Securities were prepaid in whole on December 31, 2006 at a redemption price equal to $25.0 per Trust III Preferred Security plus accumulated but unpaid distributions thereon to the date of the redemption. On December 11, 2001, Trust III also issued $0.8 million in common securities to the Company. The net proceeds of the Trust III issuance were used to redeem $25.0 million of 11.0% Trust Preferred Securities, issued by Trust II on January 31, 2002. Thereafter, Trust II was liquidated.

On April 12, 2002, Independent Capital Trust IV was formed for the purpose of issuing 1.0 million Trust IV Preferred Securities and investing the proceeds of the sale of these securities in $25.8 million of 8.375% junior subordinated debentures issued by the Company. A total of $25.0 million of 8.375% Trust IV Preferred Securities were issued by Trust IV and are scheduled to mature in 2032, callable at the option of the Company on or after April 30, 2007. Distributions on these securities are payable quarterly in arrears on the last day of March, June, September, and December, such distributions can be deferred at the option of the Company for up to five years. The Trust IV Preferred Securities can be prepaid in whole or in part on or after April 30, 2007 at a redemption price equal to $25.0 per Trust IV Preferred Security plus accumulated but unpaid distributions thereon to the date of the redemption. On April 12, 2002, Trust IV also issued $773,000 in common securities to the Company. The net proceeds of the Trust IV issuance were used to redeem $28.8 million of 9.28% Trust Preferred Securities, issued by Trust I, on May 20, 2002. Thereafter, Trust I was liquidated.

On October 12, 2006 Independent Capital Trust V, was formed for the purposed of issuing 50,000 trust preferred securities on December 28, 2006 and investing the proceeds of the sale of these securities in the $51.5 million of a variable rate (3 month LIBOR plus 148 basis points) junior subordinated debentures issued by the Company. The Company has entered into interest rate swap agreements to fix the interest rate paid on the debentures for the next ten years at 6.52%. A total of $50.0 million trust preferred securities at a variable rate of interest

90

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(3 month LIBOR plus 148 basis points) were issued by Trust V and are scheduled to mature on March 15, 2037, callable at the option of the Company on or after March 15, 2012 at a redemption price equal to $1,000 per Trust V preferred security plus accumulated but unpaid distributions thereon to the date of the redemption. On December 28, 2006, Trust V also issued $1.5 million in common securities to the Company. The trust preferred securities were issued and sold in a private placement as part of a pool transaction.

The Company used $25.0 million of the proceeds from the issuance of the trust preferred securities from Trust V to redeem all of the outstanding trust preferred securities of Trust III, which had a fixed rate of interest at 8.625%, on the first callable date of December 31, 2006. The Company intends to use the remaining $25.0 million of proceeds to redeem the outstanding trust preferred securities of Trust IV, which have a fixed rate of interest at 8.375%, on the first callable date of April 30, 2007.

Effective March 31, 2004, Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46 Revised, “Consolidation of Variable Interest Entities — an Interpretation of Accounting Research Bulletin No. 51” (“FIN 46R”) required the Company to deconsolidate its two subsidiary trusts (Independent Capital Trust III and Independent Capital Trust IV). The result of deconsolidating these subsidiary trusts is that trust preferred securities of the trusts, which were classified between liabilities and equity on the balance sheet (mezzanine section), no longer appear on the consolidated balance sheet of the Company. The related minority interest expense also is no longer included in the consolidated statement of income. Due to FIN 46R, the junior subordinated debentures of the parent company that were previously eliminated in consolidation are now included on the consolidated balance sheet within total borrowings. The interest expense on the junior subordinated debentures is included in the calculation of net interest margin of the consolidated company, negatively impacting the net interest margin by approximately 0.16% for the twelve months ending December 31, 2004 on an annualized basis and 0.13% for the twelve months ending 2005 and 2006. There is no impact on net income as the amount of interest previously recognized as minority interest is equal to the amount of interest expense that is recognized currently in the net interest margin offset by the dividend income on the subsidiary trusts common stock recognized in other non-interest income.

Unamortized issuance costs are included in other assets. Unamortized issuance costs were $981,000 and $2.0 million in 2006 and 2005, respectively.

Minority Interest expense was $1.1 million in 2004. Interest expense on the junior subordinated debentures, reported in interest on borrowings, which includes the amortization of the issuance cost, was $5.5 million in 2006 and $4.5 million in 2005. The increase in interest expense is mainly due to the write-off of $995,000 of issuance costs in connection with the redemption of trust preferred securities of Trust III.

The Company unconditionally guarantees all Trust IV and Trust V obligations under the trust preferred securities.

In December, the Trustees of Trust III and Trust IV declared a cash dividend of $0.54 and $0.52 per share to stockholders of record of Trust III and Trust IV, respectively, as of the close of business on December 28, 2006. The dividend was paid on December 29, 2006. The Company has paid all scheduled dividends.

(9) Earnings per Share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that share in the earnings of the entity.

91

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Earnings per share consisted of the following components for the years ended December 31, 2006, 2005, and 2004:

	Net Income
	2006		2005		2004
	(Dollars in thousands)
Net Income	$	32,851	$	33,205	$	30,767

	Weighted Average Shares
	2006		2005		2004
	(Dollars in thousands)
Basic Shares		14,938		15,378		14,963
Effect of dilutive securities		172		144		191
Diluted Shares		15,110		15,522		15,154

	Net Income per Share
	2006		2005		2004
Basic EPS	$	2.20	$	2.16	$	2.06
Effect of dilutive securities		0.03		0.02		0.03
Diluted EPS	$	2.17	$	2.14	$	2.03

For the year ended December 31, 2006, there were 172,137 options to purchase common stock and no shares of restricted stock excluded from the calculation of diluted earnings per share because they were anti-dilutive. For the year ended December 31, 2005, there were 350,933 options to purchase common stock and no shares of restricted stock excluded from the calculation of diluted earnings per share because they were anti-dilutive. For the year ended December 31, 2004, there were 133,781 options to purchase common stock excluded from the calculation of diluted earnings per share because they were anti-dilutive. There was no restricted stock outstanding during the year ended December 31, 2004.

(10) Goodwill and Core Deposit Intangibles

Goodwill and core deposit intangibles as of December 31, 2006 and December 31, 2005 was $56.5 million and $56.9 million, respectively. The Company acquired Falmouth Bancorp, Inc. on July 16, 2004. The transaction was accounted for in accordance with SFAS No. 142, creating goodwill for the excess of purchase price over assets acquired. Core deposit intangibles of $2.2 million were recorded upon the acquisition of Falmouth Bancorp, Inc. for the fair value of the acquired deposit base.

The changes in goodwill and core deposit intangibles for the years ended December 31, 2006 and 2005 are shown in the table below.

92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Carrying Amount of Goodwill and Core
	Deposit Intangibles
				Core Deposit
	Goodwill			Intangibles
	(Dollars in thousands)
Balance at December 31, 2004	$	55,185		$	2,103
Recorded during the year		—			—
Amortization Expense		—			(323	)
Adjustment of purchase accounting estimates		(107	)		—
Balance at December 31, 2005	$	55,078		$	1,780
Recorded during the year		—			—
Amortization Expense		—			(323	)
Adjustment of purchase accounting estimates		—			—
Balance at December 31, 2006	$	55,078		$	1,457

The following table sets forth the estimated annual amortization expense of the core deposit intangibles.

	Estimated Annual Amortization Expense
	2007		2008		2009		2010		2011
	(Dollars in thousands)
Core Deposit Intangibles	$	323	$	323	$	323	$	323	$	165

(11) Income Taxes

The provision for income taxes is comprised of the following components:

	Years Ended December 31,
	2006		2005		2004
	(Dollars in thousands)
Current Expense
Federal	$	11,321	$	10,441	$	11,716
State		3,171		2,333		2,308
TOTAL CURRENT EXPENSE		14,492		12,774		14,024
Deferred (Benefit) Expense
Federal		105		1,805		(234	)
State		162		542		(167	)
TOTAL DEFERRED EXPENSE (BENEFIT)		267		2,347		(401	)
TOTAL EXPENSE	$	14,759	$	15,121	$	13,623

93

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The difference between the statutory federal income tax rate and the effective federal income tax rate is as follows:

	Years Ended December 31,
	2006			2005			2004
	(Dollars in thousands)
Computed statutory federal income tax provision	$	16,664		$	16,914		$	15,536
State taxes, net of federal tax benefit		2,166			1,869			1,392
Nontaxable interest, net		(1,123	)		(1,174	)		(1,129	)
Tax Credits		(1,610	)		(1,714	)		(964	)
Bank Owned Life Insurance		(1,141	)		(640	)		(666	)
Other, net		(197	)		(134	)		(546	)
TOTAL EXPENSE	$	14,759		$	15,121		$	13,623

The net deferred tax asset that is included in other assets amounted to approximately $2.9 million and $3.9 million at December 31, 2006 and 2005, respectively. The tax-effected components of the net deferred tax asset at December 31, 2006 and 2005 are as follows:

	At Years Ended December 31,
	2006			2005
	(Dollars in thousands)
Deferred Tax Assets
Allowance for loan losses	$	11,190		$	11,136
Securities fair value adjustment		3,765			5,392
Accrued expenses not deducted for tax purposes		2,107			1,596
Amounts not yet recognized as a component of net periodic post retirement cost		299			—
Limited Partnerships		257			322
TOTAL	$	17,618		$	18,446
Deferred Tax Liabilities
Goodwill	$	(5,427	)	$	(4,398	)
Mark to market adjustment		(1,504	)		(2,051	)
Tax depreciation		(2,628	)		(2,038	)
Derivatives fair value adjustment		(819	)		(1,488	)
Mortgage servicing asset		(965	)		(1,095	)
Deferred loan origination fees		(2,497	)		(1,957	)
Prepaid expenses		(297	)		(801	)
Core deposit intangible		(621	)		(756	)
TOTAL	$	(14,758	)	$	(14,584	)
TOTAL NET DEFERRED TAX ASSET	$	2,860		$	3,862

The Company has determined that a valuation allowance is not required for any of its deferred tax assets since it is more likely than not that these assets will be realized principally through carry back to taxable income on prior years and future reversals of existing taxable temporary differences and by offsetting other future taxable income.

94

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(12) Common Stock Repurchase Program

On January 19, 2006, the Company’s Board of Directors approved a common stock repurchase program. Under the program, the Company was authorized to repurchase up to 800,000 shares, or approximately 5% of the Company’s outstanding common stock. During the quarter ended September 30, 2006, the Company completed its repurchase plan with a total of 800,000 shares of common stock repurchased at a weighted average share price of $31.04. Additional information about the repurchase program is set forth in Part II, Item 5 of this Form 10-K.

Additionally, on December 14, 2006 the Company’s Board of Directors approved a common stock repurchase program. Under the program, the Company is authorized to repurchase up to 1,000,000 shares of the Company’s outstanding common stock. Additional information about the repurchase program is set forth in Part II, Item 5 of this Form 10-K.

(13)  EMPLOYEE BENEFITS

Pension

All eligible officers and employees of the Bank, which includes substantially all employees of the Bank, are included in a noncontributory, defined benefit pension plan (the “Pension Plan”) provided by the Bank. The Pension Plan is administered by Pentegra Retirement Services (the “Fund”). The Fund does not segregate the assets or liabilities of all participating employers and, accordingly, disclosure of accumulated vested and nonvested benefits is not possible. Contributions are based on each individual employer’s experience. The pension plan year is July 1^st through June 30^th. The Bank has made cash contributions to the Fund of $1.4 million, $3.0 million, and $2.8 million during 2006, 2005, and 2004, respectively, of which $1.4 million relates to the 2006-2007 plan year, $3.0 million relates to the 2005-2006 plan year, and $2.0 million relates to the 2004-2005 plan year. The defined benefit plan expense was $2.2 million, $2.4 million, and $1.8 million for 2006, 2005, and 2004, respectively. In 2005 the Company amended the vesting schedule of the pension plan to provide graduated vesting beginning after two years of service whereas previously employees were not vested until five years of service.

Effective July 1, 2006, the Company froze the defined benefit plan by eliminating all future benefit accruals, with the exception of the employees that were participants on July 1, 2006 but that were not yet fully vested. These employees will earn benefits up to the year in which they are fully vested and at that point there will be no more future benefit accruals. All benefits accrued up to July 1, 2006 remain in the pension plan and the participants’ frozen benefit was determined as of July 1, 2006. Also effective July 1, 2006, the Company implemented a new defined contribution plan in which employees, with one year of service, receive a 5% cash contribution of eligible pay up to the social security limit and a 10% cash contribution of eligible pay over the social security limit up to the maximum amount permitted by law. Benefits conferred to employees under the new defined contribution plan vest immediately. The defined contribution plan expense was $927,000 in 2006 and zero for both 2005 and 2004.

Post-Retirement Benefits

Employees retiring from the Bank after attaining age 65 who have rendered at least 10 years of continuous service to the Bank are entitled to have a portion of the premium for post-retirement health care benefits and a $5,000 death benefit paid by the Bank. The health care benefits are subject to deductibles, co-payment provisions and other limitations. The Bank may amend or change these benefits periodically.

Upon accounting for the recognition of post-retirement benefits over the service lives of the employees rather than on a cash basis, the Company elected to recognize its accumulated benefit obligation of approximately $678,000 at January 1, 1993 prospectively on a straight-line basis over the average service life expectancy of the beneficiaries, which is anticipated to be less than 20 years.

Post-retirement benefit expense was $211,000 in both 2006 and 2005 and $198,000 in 2004. Contributions paid to the plan, which were used only to pay the current year benefits were $60,000, $57,000, and $39,000 for 2006, 2005, and 2004, respectively. The Company’s best estimate of contributions expected to be paid in 2007 is $59,000.

95

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

See the following table for the benefits expected to be paid in each of the next five years, in the aggregate for the next five fiscal years thereafter, and in the aggregate after those 10 years:

	Post- Retirement Expected
Year	Benefit Payment
	(Dollars in thousands)
2007	$	61
2008		62
2009		67
2010		70
2011		76
2012-2016		539
2017 and later		6,171

Effective December 31, 2006, the Company adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106, and 132(R),” which requires the Company to recognize the over funded or under funded status of a single employer defined benefit postretirement plan as an asset or liability on its balance sheet and to recognize changes in the funded status in comprehensive income in the year in which the change occurred. However, gains or losses, prior services costs or credits, and transition assets or obligations that have not yet been included in net periodic benefit cost as of the end of 2006, the fiscal year in which SFAS 158 is initially applied are to be recognized as components of the ending balance of accumulated other comprehensive income, net of tax.

96

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The measurement date used to determine the post retirement plan benefits is December 31^st for each of the years reported. The following table illustrates the status of the post-retirement benefit plan at December 31 for the years presented:

	Post-Retirement Benefits
	2006			2005			2004
	(Dollars in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	1,485		$	1,443		$	1,142
Service cost		93			93			79
Interest cost		72			72			71
Actuarial gain		(146	)		(66	)		190
Benefits paid		(60	)		(57	)		(39	)
Benefit obligation at end of year	$	1,444		$	1,485		$	1,443
Change in plan assets
Fair value of plan assets at beginning of year	$	—		$	—		$	—
Employer contribution		60			57			39
Benefits paid		(60	)		(57	)		(39	)
Fair value of plan assets at end of year	$	—		$	—		$	—
Funded Status	$	(1,444	)	$	(1,485	)	$	(1,443	)
Unrecognized net actuarial loss		—			197			264
Unrecognized net transition obligation		—			232			266
Unrecognized prior service cost		—			55			66
Accrued benefit cost	$	(1,444	)	$	(1,001	)	$	(847	)
Amounts recognized in Accumulated Other Comprehensive Income (“AOCI”), net of tax
Net loss	$	30		$	—		$	—
Prior service cost		25			—			—
Transition obligation		115			—			—
Amounts recognized in AOCI, net of tax	$	170		$	—		$	—
Net periodic benefit cost
Service cost	$	93		$	93		$	79
Interest cost		72			72			71
Expected return on plan assets		—			—			—
Amortization of transition obligation		34			34			34
Amortization of prior service cost		12			12			12
Recognized net actuarial loss		—			—			2
Net periodic benefit cost	$	211		$	211		$	198
Amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit cost over next fiscal year
Net prior service cost	$	12		$	—		$	—
Net transition obligation	$	34		$	—		$	—
Discount rate used for benefit obligations		5.75	%		5.50	%		5.75	%
Discount rate used for net periodic benefit cost		5.50	%		5.75	%		6.25	%
Rate of compensation increase		N/A			N/A			N/A

See the table titled “Incremental Effect of Applying SFAS No. 158 on Individual Line Items in the Consolidated Balance Sheets” to Follow “Supplemental Executive Retirement Benefits” for the incremental effect of applying SFAS No. 158 on individual line items within the consolidated balance sheets.

97

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Supplemental Executive Retirement Plans

The Bank maintains supplemental retirement plans for certain highly compensated employees designed to offset the impact of regulatory limits on benefits under qualified pension plans. There are supplemental retirement plans in place for seven current and four former employees.

In connection with these plans, the Bank had entered into twelve Split Dollar Life Insurance policies with eight of these individuals. In 2003, in response to changes to regulatory and IRS treatment of Split Dollar Life Insurance policies, which would require premium payments by the Bank in these policies to be considered a loan to the employee, five of these individuals transferred 100% ownership in eight policies to the Bank and receive no benefits from these policies. The Bank is the beneficiary of the policies and they are included as BOLI as an asset of the Bank. One individual reimbursed the Bank for its interest in one of these policies for which the Bank endorsed the policy over to the individual. Three split dollar life policies for three former executives remain unchanged as no additional payments are required by the Bank on the policies. The Bank will recover amounts paid into the policies upon either the death of the individual or at age 65, depending upon the policy.

The Bank has established and funded Rabbi Trusts to accumulate funds in order to satisfy the contractual liability of the supplemental retirement plan benefits for seven current executives and two former executives. These agreements provide for the Bank to pay all benefits from its general assets, and the establishment of these trust funds does not reduce nor otherwise affect the Bank’s continuing liability to pay benefits from such assets except that the Bank’s liability shall be offset by actual benefit payments made from the trusts. The related trust assets totaled $1.8 million and $1.6 million at December 31, 2006 and 2005, respectively.

Supplemental retirement expense amounted to $373,000, $349,000, and $418,000 for fiscal years 2006, 2005, and 2004, respectively. Contributions paid to the plan, which were used only to pay the current year benefits were $113,000 in 2006, $114,000 in 2005, and $124,000 in 2004. The Company’s best estimate of contributions expected to be paid in 2007 is $113,000. See the following table for the benefits expected to be paid in each of the next five years, in the aggregate for the next five fiscal years thereafter, and in the aggregate after those 10 years:

	Supplemental Executive
	Retirement Plans
Year	Expected Benefit Payment
	(Dollars in thousands)
2007	$	113
2008		131
2009		206
2010		225
2011		225
2012-2016		1,164
2017 and later		16,948

In 2003, in connection with the revisions to supplemental executive retirement plans described above, the Company elected to recognize the post retirement benefits over the service period rather than on a cash basis. Upon accounting for these plans in this manner the Company elected to recognize its additional benefit obligation that had not been recorded as of the beginning of the year of approximately $537,000 at January 1, 2003, and is amortizing this amount prospectively on a straight-line basis over the average estimated service period of the beneficiaries of approximately 13 years.

As discussed above within Post-Retirement Benefits, effective December 31, 2006, the Company adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106, and 132(R),” which is also applicable to its supplemental executive retirement plans.

98

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The measurement date used to determine the supplemental executive retirement plans benefits is December 31 for each of the years reported. The following table illustrates the status of the supplemental executive retirement plans at December 31 for the years presented:

	Supplemental Executive Retirement Benefits
	2006			2005			2004
	(Dollars in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	2,494		$	2,292		$	2,042
Service cost		198			176			138
Interest cost		136			129			122
Unamortized prior service cost		—			—			—
Plan amendment		—			—			114
Actuarial (gain)/ loss		(63	)		11			—
Benefits paid		(113	)		(114	)		(124	)
Benefit obligation at end of year	$	2,652		$	2,494		$	2,292
Change in plan assets
Fair value of plan assets at beginning of year	$	—		$	—		$	—
Return on plan assets		—			—			—
Employer contribution		113			114			124
Benefits paid		(113	)		(114	)		(124	)
Fair value of plan assets at end of year	$	—		$	—		$	—
Funded status at end of year		(2,652	)		(2,494	)		(2,292	)
Unrecognized net actuarial loss		—			116			106
Unrecognized prior service cost		—			406			449
Accrued benefit cost	$	(2,652	)	$	(1,972	)	$	(1,737	)
Amounts recognized in Accumulated Other Comprehensive Income (“AOCI”), net of tax
Net loss	$	33		$	—		$	—
Prior service cost		211			—			—
Amounts recognized in AOCI, net of tax	$	244		$	—		$	—
Information for pension plans with an accumulated benefit obligation in excess of plan assets
Projected benefit obligation	$	2,652		$	2,494		$	2,292
Accumulated benefit obligation	$	1,801		$	1,823		$	1,847
Net periodic benefit cost
Service cost	$	198		$	176		$	138
Interest cost		136			129			122
Amortization of prior service cost		43			44			158
Recognized net actuarial gain		(4	)		—			—
Net periodic benefit cost	$	373		$	349		$	418
Amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit cost over next fiscal year
Net actuarial gain	$	(4	)	$	—		$	—
Net prior service cost	$	42		$	—		$	—
Discount rate used for benefit obligation		5.75	%		5.50	%		5.75	%
Discount rate used for net periodic benefit cost		5.50	%		5.75	%		6.25	%
Rate of compensation increase		5.00	%		5.00	%		5.00	%

See the table to follow for the incremental effect of applying SFAS No. 158 on individual line items within the consolidated balance sheets.

99

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table illustrates the incremental effect of applying SFAS No. 158 for both the post retirement benefits and the supplemental executive retirement benefits on individual line items in the consolidated balance sheets.

Incremental Effect of Applying SFAS No. 158 on Individual Line Items in the Consolidated Balance Sheets at December 31, 2006

	Before									After
	Application			Adjustments						Application
	of SFAS No. 158			Post-Retirements			SERP			of SFAS No. 158
	(Dollars in thousands )
Liability for post-retirement and SERP benefits	$	3,384		$	292		$	420		$	4,096
Deferred income taxes		3,158			(122	)		(176	)		2,860
Total liabilities		2,598,722			170			244			2,599,136
Accumulated other comprehensive loss		(5,277	)		(170	)		(244	)		(5,691	)
Total stockholders’ equity		230,197			(170	)		(244	)		229,783

Other Employee Benefits

In 1994, the Bank implemented an incentive compensation plan in which senior management, and officers are eligible to participate at varying levels. The plan provides for awards based upon the attainment of a combination of Bank, divisional and individual performance objectives. In addition, the Bank from time to time has paid a discretionary bonus to non-officers of the bank. In 2005, the Bank implemented a revised incentive compensation plan for executive officers and a separate incentive plan for its officers. The 2005 plan provides for awards based upon the attainment of Bank and individual performance objectives. The expense for the incentive plans and the discretionary bonus amounted to $2.5 million, $2.9 million, and $2.5 million in 2006, 2005, and 2004, respectively.

Also, in 1994, the Bank amended its Profit Sharing Plan by converting it to an Employee Savings Plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the Employee Savings Plan, participating employees may defer a portion of their pre-tax earnings, not to exceed the Internal Revenue Service annual contribution limits. On April 14, 2004, the Bank amended the 401K Plan to eliminate company matching contributions. In the fourth quarter of 2004 in place of the 401K match contributions, the Company contributed a discretionary $250,000 of profit sharing into the plan to be disbursed amongst the participants of the plan. Prior to 2004, the Bank matched 50% of each employee’s contributions up to 6% of the employee’s earnings. A match of 25% of each employee’s contributions up to 6% of the employee’s earnings was restored in January 2005. Also, in 2005, the 401K Plan was amended to incorporate an Employee Stock Ownership Plan for contributions invested in the Company’s common stock. In 2006, 2005 and 2004, the expense for the 401K plan amounted to $353,000, $338,000, and $448,000, respectively.

The Company also maintains a deferred compensation plan for the Company’s Board of Directors. The Board of Directors are entitled to elect to defer their director’s fees until retirement. If the Director elects to do so, their compensation is invested in the Company’s stock and maintained within the Company’s Investment Management Group. The amount of compensation deferred in 2006, 2005, and 2004 was $123,000, $68,000, and $70,000, respectively. The Company has 168,961 shares provided for the plan with a related liability of $1.8 million established within shareholders’ equity.

In 1998, the Bank purchased $30.0 million of BOLI. The Bank purchased these policies for the purpose of offsetting the Bank’s future obligations to its employees under its retirement and benefit plans. As discussed above under Supplemental Executive Retirement Plans, additional policies covering the Senior Executives of the Bank were added in 2003. The total value of BOLI was $45.8 million and $44.8 million at December 31, 2006 and 2005, respectively. The bank recorded BOLI income of $3.3 million in 2006 of which $1.3 million were death benefit

100

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

proceeds realized during the first quarter. The Bank recorded $1.8 million and $1.9 million of BOLI income during 2005 and 2004, respectively.

(14)  Other Non-Interest Expenses

Included in other non-interest expenses for each of the three years in the period ended December 31, 2006, 2005 and 2004 were the following:

	2006		2005		2004
	(Dollars in thousands)
Debit card & ATM processing	$	1,187	$	940	$	624
Postage expense		1,056		1,006		942
Office supplies and printing		821		897		644
Software maintenance		963		873		308
Exams and audits		805		785		626
Legal fees		665		641		478
Insurance — other		563		518		474
Recruitment		498		501		493
Business development		178		157		482
Loss on CRA investment		142		137		178
Other non-interest expenses		8,421		7,949		7,566
TOTAL	$	15,299	$	14,404	$	12,815

(15)  Fair Value of Financial Instruments

SFAS No. 107 “Disclosures about Fair Value of Financial Instruments” (“SFAS No. 107”) requires disclosure of fair value information about financial instruments for which it is practicable to estimate that value, whether or not recognized on the balance sheet. In cases where quoted fair values are not available, fair values are based upon estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates can not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.

The carrying amount reported on the balance sheet for cash and due from banks, federal funds sold and short term investments, and interest-bearing deposits (excluding time deposits) approximates those assets’ or liabilities’ fair values. SFAS No. 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table reflects the book and fair value of financial instruments, including on-balance sheet and off-balance sheet instruments, as of December 31, 2006 and 2005.

	2006				2005
	Book Value		Fair Value		Book Value			Fair Value
	(Dollars in thousands)				(Dollars in thousands)
FINANCIAL ASSETS
Cash and Due From Banks	$	62,773	$	62,773	$	66,289		$	66,289	(a)
Federal Funds Sold and Assets Purchased Under Resale Agreement & Short Term Investments		75,518		75,518		63,662			63,662	(a)
Securities Held To Maturity		76,747		78,038		104,268			106,730	(b)
Securities Available For Sale		417,088		417,088		581,516			581,516	(b)
Trading Assets		1,758		1,758		1,557			1,557	(b)
Federal Home Loan Bank Stock		21,710		21,710		29,287			29,287	(c)
Net Loans		1,986,235		2,008,496		2,009,148			2,041,885	(d)
Loans Held For Sale		11,859		11,983		5,021			5,251	(b)
Mortgage Servicing Rights		2,439		2,439		2,892			2,892	(f)
Bank Owned Life Insurance		45,759		45,759		44,762			44,762	(b)
FINANCIAL LIABILITIES
Demand Deposits		490,036		490,036		511,920			511,920	(e)
Savings and Interest Checking Accounts		577,443		577,443		613,840			613,840	(e)
Money Market		455,737		455,737		550,677			550,677	(e)
Time Certificates of Deposit		567,128		563,339		529,057			523,095	(f)
Federal Funds Purchased and Assets Sold Under Repurchase Agreements		108,248		108,084		113,335			113,335	(f)
Treasury Tax and Loan Notes		2,953		2,953		5,452			5,452	(a)
Federal Home Loan Bank Borrowings		305,128		303,983		417,477			419,265	(f)
Junior Subordinated Debentures		77,320		77,454		51,546			52,371	(g)
UNRECOGNIZED FINANCIAL INSTRUMENTS
Standby Letters of Credit		—		62		—			61	(h)
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET NOTIONAL AMOUNTS
Interest Rate Swap Agreements		1,154		1,154		1,967			1,967	(b)
Interest Rate Cap Agreements		1,284		1,284		1,655			1,655	(b)
Forward Commitments to Sell Loans		60		60		(22	)		(22	)(b)
Commitments to Originate Fixed Rate Mortgage Loans Intended for Sale		93		93		108			108	(b)

(a)	Book value approximates fair value due to short term nature of these instruments.
(b)	Fair value was determined based on market prices or dealer quotes.
(c)	Federal Home Loan Bank stock is redeemable at cost.
(d)	The fair value of loans was estimated by discounting anticipated future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
(e)	Fair value is presented as equaling book value. SFAS No. 107 requires that deposits which can be withdrawn without penalty at any time be presented at such amount without regard to the inherent value of such deposits and the Bank’s relationship with such depositors.

102

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(f)	Fair value was determined by discounting anticipated future cash payments using rates currently available for instruments with similar remaining maturities.
(g)	Fair value was determined based upon market prices of securities with similar terms and maturities.
(h)	Fair value was determined using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of customers.

(16)  Commitments and Contingencies

Financial Instruments with Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the consolidated balance sheets. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Off-balance sheet financial instruments whose contractual amounts present credit risk include the following at December 31, 2006 and 2005.

	2006		2005
	(Dollars in thousands)
Commitments to extend credit:
Fixed rate	$	8,090	$	6,879
Adjustable rate		1,144		5,255
Unused portion of existing credit lines		481,708		477,931
Unadvanced construction loans		62,055		52,221
Standby letters of credit		8,318		8,893
Interest rate swaps — notional value		110,000		110,000
Interest rate caps — notional value		100,000		100,000

The Company’s exposure to credit loss in the event of nonperformance by the counterparty for commitments to extend credit and standby letters of credit is represented by the contractual amounts of those instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. The Bank evaluates each customer’s creditworthiness on an individual basis. The amount of collateral obtained upon extension of the credit is based upon management’s credit evaluation of the customer. Collateral varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial real estate. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued by the Bank to guarantee performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The collateral supporting those commitments is essentially the same as for other commitments. Most guarantees extend for one year.

As a component of its asset/liability management activities intended to control interest rate exposure, the Bank has entered into certain hedging transactions. Interest rate swap agreements represent transactions, which involve the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying principal amounts.

At December 31, 2006 and December 31, 2005 the Company had interest rate swaps, designated as “cash flow” hedges. The purpose of these swaps is to hedge the variability in the cash outflows of LIBOR-based borrowings

103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

attributable to changes in interest rates. The table below shows interest rate derivatives the Company held as of December 31, 2006 and December 31, 2005:

	Interest Rate Derivatives
	As of December 31, 2006
									Receive					Pay Fixed			Market Value
	Notional		Trade		Effective		Maturity		(Variable)		Current Rate			Swap Rate/			at December 31,
	Amount		Date		Date		Date		Index		Received			Cap Strike Rate			2006
	(Dollars in thousands)
Interest Rate Swaps
	$	25,000		16-Jan-04		21-Jan-04		21-Jan-07		3 Month LIBOR		5.37	%		2.49	%	$	47
	$	35,000		18-Jan-05		20-Jan-05		20-Jan-10		3 Month LIBOR		5.37	%		4.06	%	$	936
	$	25,000		16-Feb-06		28-Dec-06		28-Dec-16		3 Month LIBOR		5.36	%		5.04	%	$	82
	$	25,000		16-Feb-06		28-Dec-06		28-Dec-16		3 Month LIBOR		5.36	%		5.04	%	$	89
Total	$	110,000													Total		$	1,154
Interest Rate Caps
	$	100,000		27-Jan-05		31-Jan-05		31-Jan-08		3 Month LIBOR		5.38	%		4.00	%	$	1,284
Grand Total	$	210,000													Grand Total		$	2,438

	As of December 31, 2005
									Receive					Pay Fixed			Market Value
	Notional		Trade		Effective		Maturity		(Variable)		Current Rate			Swap Rate/			at December 31,
	Amount		Date		Date		Date		Index		Received			Cap Strike Rate			2005
Interest Rate Swaps
	$	25,000		20-Sep-02		21-Nov-03		21-Nov-06		3 Month LIBOR		4.37	%		3.65	%	$	237
	$	25,000		20-Sep-02		21-Nov-03		21-Nov-06		3 Month LIBOR		4.37	%		3.65	%	$	237
	$	25,000		16-Jan-04		21-Jan-04		21-Jan-07		3 Month LIBOR		4.18	%		2.49	%	$	588
	$	35,000		18-Jan-05		20-Jan-05		20-Jan-10		3 Month LIBOR		4.17	%		4.06	%	$	905
Total	$	110,000													Total		$	1,967
Interest Rate Caps
	$	100,000		27-Jan-05		31-Jan-05		31-Jan-08		3 Month LIBOR		4.26	%		4.00	%	$	1,655
Grand Total	$	210,000													Grand Total		$	3,622

During February, 2006 the Company entered into two forward starting swaps, each with a $25.0 million notional amount, with the intention of hedging $50.0 million variable rate (LIBOR plus 148 basis points) trust preferred securities. On December 28, 2006, these forward starting swaps became effective when Trust V issued $50.0 of trust preferred securities (see Junior Subordinated Debentures within Section 7 hereof) which pay interest at a variable rate of interest of LIBOR plus 148 basis points. Through these swaps the Company has effectively locked in a fixed rate of 6.52% on its trust preferred obligation.

As a result of the prolonged flat/inverted yield curve environment and the resulting strategy to de-leverage the balance sheet, management unwound $50.0 million of notional value of interest rate swaps hedging 3 month revolving FHLB advances tied to LIBOR and paid down the underlying borrowings. The influx of liquidity associated with cash flows from the securities portfolio not being reinvested made the borrowings unnecessary. Gains of $237,000 and $215,000 were realized against interest expense in the first quarter of 2006 and the third quarter of 2005, respectively, associated with the sale of these interest rate swaps.

As a result of interest rate swaps, the Bank realized income of $3.1 million, $884,000, and $755,000 for the years ended December 31, 2006, 2005, and 2004, respectively. There was no impact on income as a result of hedge ineffectiveness associated with interest rate swaps.

104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During 2002, the Company sold interest rate swaps resulting in gross gains of $7.1 million. The gain was deferred and is being amortized over the lives of the hedged items. The deferred gain is classified in other comprehensive income, net of tax, as a component of equity with the amortized gains recognized into earnings. At December 31, 2006, there are $245,000 gross, or $142,000, net of tax, of such deferred gains included in other comprehensive income. At December 31, 2005, there were $980,000 gross, or $568,000, net of tax, of such deferred gains included in other comprehensive income.

Entering into interest rate swap agreements, including interest rate caps, involves both the credit risk of dealing with counterparties and their ability to meet the terms of the contracts and interest rate risk. While notional principal amounts are generally used to express the volume of these transactions, the amounts potentially subject to credit risk are smaller due to the structure of the agreements. The Bank is a direct party to these agreements that provide for net settlement between the Bank and the counterparty on a monthly, quarterly or semiannual basis. Should the counterparty fail to honor the agreement, the Bank’s credit exposure is limited to the net settlement amount. The Bank had a net receivable of $506,000 at December 31, 2006 and of $175,000 at December 31, 2005.

Leases

The Company leased equipment, office space, space for ATM locations, and certain branch locations under non-cancelable operating leases. The following is a schedule of minimum future lease commitments under such leases as of December 31, 2006:

	Lease
Years	Commitments
	(Dollars in thousands)
2007	$	2,389
2008		2,212
2009		1,957
2010		1,614
2011		1,101
Thereafter		4,054
Total future minimum rentals	$	13,327

Rent expense incurred under operating leases was approximately $2.8 million in 2006, $2.9 million in 2005 and $2.5 million in 2004. Renewal options ranging from 3 to 10 years exist for several of these leases. The Company has entered into lease agreements with related third parties on substantially the same terms as those prevailing at the time for comparable transactions with unrelated parties. Rent expense incurred under related party leases was approximately $796,000 in 2006, $763,000 in 2005 and $804,000 in 2004. In addition, the Company had a sub-lease in which it earned lease income of approximately $71,000 in 2004.

Other Contingencies

At December 31, 2006, there were lawsuits pending that arose in the ordinary course of business. Management has reviewed these actions with legal counsel and has taken into consideration the view of counsel as to the outcome of the litigation. In the opinion of management, final disposition of these lawsuits is not expected to have a material adverse effect on the Company’s financial position or results of operations (see Item 3. Legal Proceedings hereof for more information related to outstanding legal cases).

The Bank is required to maintain certain reserve requirements of vault cash and/or deposits with the Federal Reserve Bank of Boston. The amount of this reserve requirement was $10.7 million and $10.0 million at December 31, 2006 and 2005, respectively.

On April 1, 2006 the Federal National Mortgage Association (“FNMA”) Master Commitment to deliver loans was executed with an expiration date of March 31, 2007 for $10.0 million (all of which is optional to the Company).

105

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of December 31, 2006, there is no Master Agreement in place with Federal Home Loan Mortgage Corporation (“FHLMC”), nor is there a plan to put one in place.

(17)  Regulatory Capital Requirements

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total and Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2006 that the Company and the Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2006, the most recent notification from the Federal Deposit Insurance Corporation, and the Commonwealth of Massachusetts relating to the Bank, categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized an insured depository institution must maintain minimum Total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

106

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s and the Bank’s actual capital amounts and ratios are also presented in the table.

												To be Well Capitalized
												Under Prompt
						For Capital						Corrective Action
	Actual					Adequacy Purposes						Provisions
	Amount		Ratio			Amount			Ratio			Amount			Ratio
	(Dollars in thousands)
As of December 31, 2006:
Company: (Consolidated)
Total capital (to risk weighted assets)	$	254,581		12.30	%	$	165,584	³		8.0	%		N/A			N/A
Tier 1 capital (to risk weighted assets)		228,695		11.05			82,792	³		4.0			N/A			N/A
Tier 1 capital (to average assets)		228,695		8.05			113,615	³		4.0			N/A			N/A
Bank:
Total capital (to risk weighted assets)	$	241,570		11.67	%	$	165,550	³		8.0	%	$	206,938	³		10.0	%
Tier 1 capital (to risk weighted assets)		215,691		10.42			82,775	³		4.0			124,163	³		6.0
Tier 1 capital (to average assets)		215,691		7.60			113,475	³		4.0			141,844	³		5.0
As of December 31, 2005:
Company: (Consolidated)
Total capital (to risk weighted assets)	$	254,524		11.99	%	$	169,808	³		8.0	%		N/A			N/A
Tier 1 capital (to risk weighted assets)		227,990		10.74			84,904	³		4.0			N/A			N/A
Tier 1 capital (to average assets)		227,990		7.71			118,224	³		4.0			N/A			N/A
Bank:
Total capital (to risk weighted assets)	$	239,567		11.32	%	$	169,249	³		8.0	%	$	211,561	³		10.0	%
Tier 1 capital (to risk weighted assets)		213,120		10.07			84,624	³		4.0			1,269	³		6.0
Tier 1 capital (to average assets)		213,120		7.22			118,072	³		4.0			147,591	³		5.0

107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(18)  Selected Quarterly Financial Data (Unaudited)

	First					Second				Third				Fourth
	Quarter					Quarter				Quarter				Quarter
	2006			2005		2006		2005		2006		2005		2006			2005
	(Dollars in thousands, Except Per Share Data)
INTEREST INCOME	$	40,701		$	36,976	$	41,207	$	38,626	$	42,809	$	39,225	$	42,975		$	40,834
INTEREST EXPENSE		14,395			11,108		15,398		12,282		16,980		12,506		18,265			13,923
NET INTEREST INCOME	$	26,306		$	25,868	$	25,809	$	26,344	$	25,829	$	26,719	$	24,710		$	26,911
PROVISION FOR LOAN LOSSES		750			930		350		1,105		530		1,070		705			1,070
NON-INTEREST INCOME		6,787			6,244		7,222		6,436		7,049		7,104		7,345			6,751
NET (LOSS)/GAIN ON SECURITIES		(1,769	)		343		—		273		—		—		(1,392	)		—
BOLI DEATH BENEFIT PROCEEDS		1,316			—		—		—		—		—		—			—
NON-INTEREST EXPENSES		20,384			19,790		20,646		20,336		19,973		20,209		20,155			20,156
RECOVERY ON WORLDCOM BOND CLAIM		—			—		—		—		—		—		(1,892	)		—
PROVISION FOR INCOME TAXES		3,602			3,821		3,745		3,571		3,819		3,857		3,594			3,872
NET INCOME	$	7,904		$	7,914	$	8,290	$	8,041	$	8,556	$	8,687	$	8,101		$	8,564
BASIC EARNINGS PER SHARE	$	0.52		$	0.52	$	0.55	$	0.52	$	0.58	$	0.56	$	0.55		$	0.56
DILUTED EARNINGS PER SHARE	$	0.51		$	0.51	$	0.55	$	0.52	$	0.58	$	0.56	$	0.54		$	0.55
Weighted average common shares (Basic)		15,343,807			15,347,540		14,999,127		15,372,253		14,696,065		15,391,937		14,681,644			15,402,690
Common stock equivalents		153,624			164,680		162,747		132,723		178,433		145,684		198,499			131,400
Weighted average common shares (Diluted)		15,497,431			15,512,220		15,161,874		15,504,976		14,874,498		15,537,621		14,880,143			15,534,090

(19)  Parent Company Financial Statements

Condensed financial information relative to the Parent Company’s balance sheets at December 31, 2006 and 2005 and the related statements of income and cash flows for the years ended December 31, 2006, 2005, and 2004 are presented below. The statement of stockholders’ equity is not presented below as the parent company’s stockholders’ equity is that of the consolidated Company.

108

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

BALANCE SHEETS

	At December 31,
	2006		2005
	(Dollars in thousands)
Assets:
Cash*	$	38,804	$	15,337
Investments in subsidiaries*		269,775		264,828
Deferred tax asset		242		280
Deferred stock issuance costs		981		1,991
Other assets		182		30
Total assets	$	309,984	$	282,466
Liabilities and Stockholders’ Equity:
Dividends payable	$	2,352	$	2,312
Junior subordinated debentures		77,320		51,546
Accrued federal income taxes		471		436
Other liabilities		58		20
Total liabilities		80,201		54,314
Stockholders’ equity		229,783		228,152
Total liabilities and stockholders’ equity	$	309,984	$	282,466

* Eliminated in consolidation

STATEMENTS OF INCOME

	Years Ended December 31,
	2006		2005		2004
	(Dollars in thousands)
Income:
Dividends received from subsidiaries	$	35,168	$	22,609	$	21,778
Interest income		95		36		38
Total income		35,263		22,645		21,816
Expenses:
Interest expense		5,504		4,469		4,448
Other expenses		356		359		702
Total expenses		5,860		4,828		5,150
Income before income taxes and equity in undistributed income of subsidiaries		29,403		17,817		16,666
Equity in undistributed income of subsidiaries		1,713		13,703		12,491
Income tax benefit		1,735		1,685		1,610
Net income	$	32,851	$	33,205	$	30,767

109

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

STATEMENTS OF CASH FLOWS

	Years Ended December 31 ,
	2006			2005			2004
	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	32,851		$	33,205		$	30,767
ADJUSTMENTS TO RECONCILE NET INCOME
TO CASH PROVIDED FROM OPERATING ACTIVITIES:
Amortization		—			—			22
Increase in other assets		(56	)		(117	)		(11	)
Increase in other liabilities		39			5			89
Equity in income of subsidiaries		(1,713	)		(13,703	)		(12,491	)
TOTAL ADJUSTMENTS		(1,730	)		(13,815	)		(12,391	)
NET CASH PROVIDED FROM OPERATING ACTIVITIES		31,121			19,390			18,376
CASH FLOWS USED IN INVESTING ACTIVITIES:
Cash used for Merger and Acquisition- Falmouth Acquisition		—			—			(18,131	)
Capital Investment in subsidiary-Independent Capital Trust V		(1,547	)		—			—
NET CASH USED IN INVESTING ACTIVITIES		(1,547	)		—			(18,131	)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Proceeds from stock issued and stock options exercised		1,344			1,072			1,808
Issuance of junior subordinated debentures		51,547			—			—
Redemption of junior subordinated debentures		(25,773	)		—			—
Amortization/write-off of issuance costs		1,083			88			65
Payments for purchase of common stock		(24,826	)		—			—
Dividends paid		(9,482	)		(9,067	)		(8,153	)
NET CASH USED IN FINANCING ACTIVITIES		(6,107	)		(7,907	)		(6,280	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		23,467			11,483			(6,035	)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR		15,337			3,854			9,889
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	$	38,804		$	15,337		$	3,854
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes	$	—		$	—		$	—
Interest on junior subordinated debentures	$	4,421		$	4,381		$	4,381
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Change in fair value of derivatives, net of tax	$	99		$	—		$	—
Issuance of shares from treasury stock for the exercise of stock options	$	—		$	—		$	1,091

110

Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None

Item 9A.   Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures  The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this annual report.

Changes in Internal Controls over Financial Reporting  There were no changes in our internal control over financial reporting that occurred during the fourth quarter that have materially affected, or are, reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Management’s Report on Internal Control Over Financial Reporting  Management of Independent Bank Corp. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Independent Bank Corp.’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflects the transactions and disposition of the assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of year-end December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on our assessment and those criteria, management believes that the Company maintained effective internal control over financial reporting as of year-end December 31, 2006.

Independent Bank Corp.’s independent registered public accounting firm has issued an attestation report on management’s assessment of the Company’s internal control over financial reporting. That report appears below.

111

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Independent Bank Corp.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Independent Bank Corp. maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Independent Bank Corp.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of Independent Bank Corp.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Independent Bank Corp. maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Independent Bank Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Independent Bank Corp. and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders’ equity, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2006, and our report dated February 26, 2007 expressed an unqualified opinion on those consolidated financial statements.

Boston, MA

February 26, 2007

112

Item 9B.   Other Information

None

PART III

Item 10.   Directors, Executive Officers and Corporate Governance

The information required herein is incorporated by reference from the Company’s proxy statement (the “Definitive Proxy Statement”) relating to its April 12, 2007 Annual Meeting of Stockholders that will be filed with the Commission within 120 days following the fiscal year end December 31, 2006.

Item 11.   Executive Compensation

The information required herein is incorporated by reference to “Executive Compensation” in the Definitive Proxy Statement.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2006 about the securities authorized for issuance under our equity compensation plans, consisting of our 1996 Director Stock Plan, our 1997 Employee Stock Option Plan, our 2005 Employee Stock Plan (“the 2005 Plan”), and our 2006 Non-Employee Director Stock Plan (“the 2006 Plan”). Our shareholders previously approved each of these plans and all amendments that were subject to shareholder approval. We have no other equity compensation plans that have not been approved by shareholders.

Equity Compensation Plans

					Number of
					Securities
					Remaining
					Available
	Number of		Weighted-		for Future Issuance
	Securities to be		Average		Under Equity
	Issued upon		Exercise Price of		Compensation
	Exercise of		Outstanding		Plans
	Outstanding		Options		(Excluding
	Options, Warrants		Warrants and		Securities Reflected
Equity Compensation Plan Category	and Rights		Rights		in Column (a))
	(a)		(b)		(c)
Plans approved by security holders		845,095	$	26.43		718,818	(1)
Plans not approved by security holders		—		—		—
Total		845,095	$	26.43		718,818

(1) There are no shares available for future issuance under the 1996 Director Stock Plan, 28,203 shares available for future issuance under the 1997 Employee Stock Option Plan, 655,215 shares available for future issuance under the 2005 Employee Stock Plan, and 34,800 shares available for future issuance under the 2006 Non-Employee Director Stock Plan, shares under the 2005 and 2006 plans may be issued as non-qualified stock options or restricted stock awards.

Item 13.   Certain Relationships and Related Transactions, and Director Independence

The information required herein is incorporated by reference from the Definitive Proxy Statement.

Item 14.   Principal Accounting Fees and Services

The information required herein is incorporated by reference from the Definitive Proxy Statement.

113

PART IV

Item 15.   Exhibits, Financial Statement Schedules

(a) Documents Filed as Part of this Report

(1)  The following financial statements are incorporated herein by reference from Item 8 hereto:

Management’s Report on Internal Control over Financial Reporting

Reports of Independent Registered Public Accounting Firm.

Consolidated balance sheets as of December 31, 2006 and 2005.

Consolidated statements of income for each of the years in the three-year period ended December 31, 2006.

Consolidated statements of stockholders’ equity for each of the years in the three-year period ended December 31, 2006.

Consolidated statements of comprehensive income for each of the years in the three-year period ended December 31, 2006.

Consolidated statements of cash flows for each of the years in the three-year period ended December 31, 2006.

Notes to Consolidated Financial Statements.

(2) All schedules for which provision is made in the applicable accounting regulations of the SEC are omitted because of the absence of conditions under which they are required or because the required information is included in the consolidated financial statements and related notes thereto.

(3) The following exhibits are filed as part of this Form 10-K, and this list includes the Exhibit Index.

114

EXHIBITS INDEX

No.			Exhibit
	3	.(i)	Restated Articles of Organization, as amended as of February 10, 2005, incorporated by reference to the Company’s Form 8-K filed on May 18, 2005.
	3	.(ii)	Amended and Restated Bylaws of the Company, as amended as of February 10, 2005, incorporated by reference to the Company’s Form 8-K filed on May 18, 2005.
	4	.1	Specimen Common Stock Certificate, incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 1992.
	4	.2	Specimen preferred Stock Purchase Rights Certificate, incorporated by reference to the Company’s Form 8-A Registration Statement filed by the Company on November 5, 2001.
	4	.3	Indenture of Registrant relating to the 8.625% Junior Subordinated Debentures issued to Independent Capital Trust III, incorporated by reference to the Form 8-K filed by the Company on April 18, 2002.
	4	.4	Form of Certificate of 8.625% Junior Subordinated Debenture (included as Exhibit A to Exhibit 4.3).
	4	.5	Amended and Restated Declaration of Trust for Independent Capital Trust III, incorporated by reference to the Form 8-K filed by the Company on April 18, 2002.
	4	.6	Form of Preferred Security Certificate for Independent Capital Trust III (included as Exhibit D to exhibit 4.5).
	4	.7	Preferred Securities Guarantee Agreement of Independent Capital Trust III, incorporated by reference to the Form 8-K filed by the Company on April 18, 2002.
	4	.8	Indenture of Registrant relating to the 8.375% Junior Subordinated Debentures issued to Independent Capital Trust IV, incorporated by reference to the Form 8-K filed by the Company on April 18, 2002.
	4	.9	Form of Certificate of 8.375% Junior Subordinated Debenture (included as Exhibit A to Exhibit 4.8).
	4	.10	Amended and Restated Declaration of Trust for Independent Capital Trust IV, incorporated by reference to the Form 8-K filed by the Company on April 18, 2002.
	4	.11	Form of Preferred Security Certificate for Independent Capital Trust IV (included as Exhibit D to Exhibit 4.10).
	4	.12	Preferred Securities Guarantee Agreement of Independent Capital Trust IV, incorporated by reference to the Form 8-K filed by the Company on April 18, 2002.
	4	.13	Indenture of Registrant relating the Junior Subordinated Debt Securities issued to Independent Capital Trust V is filed as an exhibit under this form 10-K attached here to.
	4	.14	Form of Certificate of Junior Subordinated Debt Security (included as Exhibit A to Exhibit 4.13)
	4	.15	Amended and Restated Declaration of trust for Independent Capital Trust V is filed as an exhibit under this Form 10-K attached hereto
	4	.16	Form of Capital Security Certificate for Independent Capital Trust V (included as Exhibit A-1 to Exhibit 4.15).
	4	.17	Guarantee Agreement relating to Independent Capital Trust V is filed as an exhibit under this form 10-K attached hereto.
	4	.18	Forms of Capital Securities Purchase Agreements for Independent Capital Trust V is filed as an exhibit under this Form 10-K attached here to.
	10	.1	Amended and Restated Independent Bank Corp. 1987 Incentive Stock Option Plan (“Stock Option Plan”) (Management contract under Item 601 (10)(iii)(A)). Incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 1994.
	10	.2	Independent Bank Corp. 1996 Non-Employee Directors’ Stock Option Plan (Management contract under Item 601 (10)(iii)(A)). Incorporated by reference to the Company’s Definitive Proxy Statement for the 1996 Annual Meeting of Stockholders filed with the Commission on March 19, 1996.
	10	.3	Independent Bank Corp. 1997 Employee Stock Option Plan (Management contract under Item 601 (10)(iii)(A)). Incorporated by reference to the Company’s Definitive Proxy Statement for the 1997 Annual Meeting of Stockholders filed with the Commission on March 20, 1997.
	10	.4	Independent Bank Corp. 2005 Employee Stock Plan incorporated by reference to Form S-8 filed by the Company on July 28, 2005.

115

No.			Exhibit
	10	.5	Renewal Rights Agreement noted as of September 14, 2000 by and between the Company and Rockland, as Rights Agent (Exhibit to Form 8-K filed on October 23, 2000).
	10	.6	Independent Bank Corp. Deferred Compensation Program for Directors (restated as amended as of December 1, 2000). Incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2000.
	10	.7	Master Securities Repurchase Agreement, incorporated by reference to Form S-1 Registration Statement filed by the Company on September 18, 1992.
	10	.8	First Amended and Restated Employment Agreement between Christopher Oddleifson and the Company and Rockland Trust dated April 14, 2005 is filed as an exhibit under the Form 8-K filed on April 14, 2005.
	10	.9	Revised employment agreement between Raymond G. Fuerschbach, Edward F. Jankowski, Ferdinand T. Kelley, Jane L. Lundquist, Edward H. Seksay and Denis K. Sheahan and the Company and Rockland Trust (Management Contracts under Item 601 (10)(iii)(A)) dated December 6, 2004 are filed as an exhibit under the Form 8-K filed on December 9, 2004.
	10	.10	Options to acquire shares of the Company’s Common Stock pursuant to the Independent Bank Corp. 1997 Employee Stock Option Plan were awarded to Christopher Oddleifson, Raymond G. Fuerschbach, Edward F. Jankowski, Ferdinand T. Kelley, Jane L. Lundquist, Edward H. Seksay and Denis K. Sheahan pursuant to option agreements dated December 9, 2004. The form of these option agreements were filed as exhibits under the Form 8-K filed on December 15, 2004.
	10	.11	On-Site Outsourcing Agreement by and between Fidelity Information Services, Inc. and Independent Bank Corp., effective as of November 1, 2004. Incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2004 filed on March 4, 2005. (PLEASE NOTE: Portions of this contract, and its exhibits and attachments, have been omitted pursuant to a request for confidential treatment sent on March 4, 2005 to the Securities and Exchange Commission. The locations where material has been omitted are indicated by the following notation: ”{****}“. The entire contract, in unredacted form, has been filed separately with the Commission with the request for confidential treatment.)
	10	.12	New Markets Tax Credit program Allocation Agreement between the Community Development Financial Institutions Fund of the United States Department of the Treasury and Rockland Community Development with an Allocation Effective Date of September 22, 2004 is filed as an exhibit under the Form 8-K filed on October 14, 2004.
	10	.13	Options to acquire shares of the Company’s Common Stock pursuant to the Independent Bank Corp. 2005 Employee Stock Plan were awarded to Christopher Oddleifson, Raymond G. Fuerschbach, Edward F. Jankowski, Ferdinand T. Kelley, Jane L. Lundquist, Edward H. Seksay, and Denis K. Sheahan pursuant to option agreements dated December 15, 2005. The form of option agreements used for these awards were filed as exhibits under the Form 8-K filed on December 20, 2005.
	10	.14	Independent Bank Corp. and Rockland Trust Company Executive Officer Performance Incentive Plan (the “2006 Executive Incentive Plan”) (Management contract under Item 601 (10)(iii)(A)). Incorporated by reference to the Company’s Form 10-Q for the quarter ended March 31, 2006, filed on May 9, 2006. (PLEASE NOTE: Portions of the 2006 Executive Incentive Plan, and its exhibits and attachments, have been omitted pursuant to a request for confidential treatment sent on May 8, 2006 to the Securities and Exchange Commission. The locations where material has been omitted are indicated by the following notation: “{****}”. The entire 2006 Executive Incentive Plan, in unredacted form, has been filed separately with the Commission with the request for confidential treatment.)
	10	.15	Independent Bank Corp. 2006 Non-Employee Director Stock Plan incorporated by reference to Form S-8 filed by the Company on April 17, 2006.
	10	.16	Independent Bank Corp. Stock Option Agreement for Non-Employee Director is filed as an exhibit under the Form 10-Q filed on May 9, 2006.
	10	.17	Independent Bank Corp. Restricted Stock Agreement for Non-Employee Director is filed as an exhibit under the Form 10-Q filed on May 9, 2006.
	10	.18	New Markets Tax Credit program Allocation Agreement between the Community Development Financial Institutions Fund of the United States Department of the Treasury and Rockland Community Development with an Allocation Effective Date of January 9, 2007 is filed as an exhibit under this Form 10-K attached hereto.

116

No.			Exhibit
	10	.19	Independent Bank Corp. and Rockland Trust Company 2007 Executive Officer Performance Incentive Plan (the “2007 Executive Incentive Plan”) (Management contract under Item 601 (10)(iii)(A)). Filed as an exhibit under this Form 10-K attached hereto (PLEASE NOTE: Portions of the 2007 Executive Incentive Plan, and its exhibits and attachments, have been omitted pursuant to a request for confidential treatment sent on March xx, 2007 to the Securities and Exchange Commission. The locations where material has been omitted are indicated by the following notation: “{****}”. The entire 2007 Executive Incentive Plan, in unredacted form, has been filed separately with the Commission with the request for confidential treatment.)
	21		Subsidiaries of the Registrant, incorporated by reference to Form S-3 Registration Statement filed by the Company on October 28, 1999.
	23		Consent of Independent Registered Public Accounting Firm.
	31	.1	Section 302 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.
	31	.2	Section 302 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.
	32	.1	Section 906 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.
	32	.2	Section 906 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.

(b) See (a)(3) above for all exhibits filed herewith and the Exhibit Index.

(c) All schedules are omitted as the required information is not applicable or the information is presented in the Consolidated Financial Statements or related notes.

117

SIGNATURES

Pursuant to the requirements of Section 13 or 8(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Independent Bank Corp.

/s/  Christopher Oddleifson

Christopher Oddleifson,

Chief Executive Officer and President

Date: February 15, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Each person whose signature appears below hereby makes, constitutes and appoints Christopher Oddleifson and Denis K. Sheahan and each of them acting individually, his true and lawful attorneys, with full power to sign for such person and in such person’s name and capacity indicated below any and all amendments to this Form 10-K, hereby ratifying and confirming such person’s signature as it may be signed by said attorneys to any and all amendments.

/s/  Richard S. Anderson Richard S. Anderson	Director	Date:  February 15, 2007
/s/  W. Paul Clark W. Paul Clark	Director	Date:  February 15, 2007
/s/  Benjamin A. Gilmore, II Benjamin A. Gilmore, II	Director	Date:  February 15, 2007
/s/  E. Winthrop Hall E. Winthrop Hall	Director	Date:  February 15, 2007
/s/  Kevin J. Jones Kevin J. Jones	Director	Date:  February 15, 2007
/s/  Donna A. Lopolito Donna A. Lopolito	Director	Date:  February 15, 2007
/s/  Eileen C. Miskell Eileen C. Miskell	Director	Date:  February 15, 2007
/s/  Christopher Oddleifson Christopher Oddleifson	Director	Date:  February 15, 2007
/s/  Richard H. Sgarzi Richard H. Sgarzi	Director	Date:  February 15, 2007
/s/  John H. Spurr, Jr. John H. Spurr, Jr.	Director	Date:  February 15, 2007

118

/s/  Robert D. Sullivan Robert D. Sullivan	Director	Date:  February 15, 2007
/s/  Brian S. Tedeschi Brian S. Tedeschi	Director	Date:  February 15, 2007
/s/  Thomas J. Teuten Thomas J. Teuten	Director and Chairman of the Board	Date:  February 15, 2007
/s/  Denis K. Sheahan Denis K. Sheahan	Chief Financial Officer and Treasurer (principal financial and accounting officer)	Date:  February 15, 2007

119

EX-4.13

                                                                    Exhibit 4.13





                             INDEPENDENT BANK CORP.
                                   as Company

                                    INDENTURE
                          Dated as of December 28, 2006

                        LASALLE BANK NATIONAL ASSOCIATION
                                   As Trustee

                       JUNIOR SUBORDINATED DEBT SECURITIES

                               Due March 15, 2037





(8) Independent Bank Corp.



                                TABLE OF CONTENTS



                                                                            PAGE
                                                                            ----
                                                                         
                                    ARTICLE I
                                   DEFINITIONS

SECTION 1.01.  Definitions...............................................     1

                                   ARTICLE II
                                 DEBT SECURITIES

SECTION 2.01.  Authentication and Dating.................................     9
SECTION 2.02.  Form of Trustee's Certificate of Authentication...........     9
SECTION 2.03.  Form and Denomination of Debt Securities..................    10
SECTION 2.04.  Execution of Debt Securities..............................    10
SECTION 2.05.  Exchange and Registration of Transfer of Debt Securities..    10
SECTION 2.06.  Mutilated, Destroyed, Lost or Stolen Debt Securities......    13
SECTION 2.07.  Temporary Debt Securities.................................    14
SECTION 2.08.  Payment of Interest.......................................    15
SECTION 2.09.  Cancellation of Debt Securities Paid, etc.................    16
SECTION 2.10.  Computation of Interest...................................    16
SECTION 2.11.  Extension of Interest Payment Period......................    18
SECTION 2.12.  CUSIP Numbers.............................................    19
SECTION 2.13.  Income Tax Certification..................................    19
SECTION 2.14.  Global Debentures.........................................    19

                                   ARTICLE III
                       PARTICULAR COVENANTS OF THE COMPANY

SECTION 3.01.  Payment of Principal, Premium and Interest; Agreed
               Treatment of the Debt Securities..........................    21
SECTION 3.02.  Offices for Notices and Payments, etc.....................    22
SECTION 3.03.  Appointments to Fill Vacancies in Trustee's Office........    23
SECTION 3.04.  Provision as to Paying Agent..............................    23
SECTION 3.05.  Certificate to Trustee....................................    24
SECTION 3.06.  Additional Interest.......................................    24
SECTION 3.07.  Compliance with Consolidation Provisions..................    25
SECTION 3.08.  Limitation on Dividends...................................    25
SECTION 3.09.  Covenants as to the Trust.................................    25



                                      -i-



                                TABLE OF CONTENTS
                                   (CONTINUED)



                                                                            PAGE
                                                                            ----
                                                                         
                                   ARTICLE IV
                LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

SECTION 4.01.  Securityholders' Lists....................................    26
SECTION 4.02.  Preservation and Disclosure of Lists......................    26
SECTION 4.03.  Financial and Other Information...........................    27

                                    ARTICLE V
     REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT

SECTION 5.01.  Events of Default.........................................    28
SECTION 5.02.  Payment of Debt Securities on Default; Suit Therefor......    30
SECTION 5.03.  Application of Moneys Collected by Trustee................    31
SECTION 5.04.  Proceedings by Securityholders............................    32
SECTION 5.05.  Proceedings by Trustee....................................    32
SECTION 5.06.  Remedies Cumulative and Continuing........................    33
SECTION 5.07.  Direction of Proceedings and Waiver of Defaults by
               Majority of Securityholders...............................    33
SECTION 5.08.  Notice of Defaults........................................    34
SECTION 5.09.  Undertaking to Pay Costs..................................    34

                                   ARTICLE VI
                             CONCERNING THE TRUSTEE

SECTION 6.01.  Duties and Responsibilities of Trustee....................    35
SECTION 6.02.  Reliance on Documents, Opinions, etc......................    36
SECTION 6.03.  No Responsibility for Recitals, etc.......................    37
SECTION 6.04.  Trustee, Authenticating Agent, Paying Agents, Transfer
               Agents or Registrar May Own Debt Securities...............    37
SECTION 6.05.  Moneys to be Held in Trust................................    37
SECTION 6.06.  Compensation and Expenses of Trustee......................    38
SECTION 6.07.  Officers' Certificate as Evidence.........................    39
SECTION 6.08.  Eligibility of Trustee....................................    39
SECTION 6.09.  Resignation or Removal of Trustee, Calculation Agent,
               Paying Agent or Debt Security Registrar...................    39
SECTION 6.10.  Acceptance by Successor...................................    41



                                      -ii-



                                TABLE OF CONTENTS
                                   (CONTINUED)



                                                                            PAGE
                                                                            ----
                                                                         
SECTION 6.11.  Succession by Merger, etc.................................    42
SECTION 6.12.  Authenticating Agents.....................................    42

                                   ARTICLE VII
                         CONCERNING THE SECURITYHOLDERS

SECTION 7.01.  Action by Securityholders.................................    43
SECTION 7.02.  Proof of Execution by Securityholders.....................    44
SECTION 7.03.  Who Are Deemed Absolute Owners............................    44
SECTION 7.04.  Debt Securities Owned by Company Deemed Not Outstanding...    45
SECTION 7.05.  Revocation of Consents; Future Securityholders Bound......    45

                                  ARTICLE VIII
                            SECURITYHOLDERS' MEETINGS

SECTION 8.01.  Purposes of Meetings......................................    45
SECTION 8.02.  Call of Meetings by Trustee...............................    46
SECTION 8.03.  Call of Meetings by Company or Securityholders............    46
SECTION 8.04.  Qualifications for Voting.................................    46
SECTION 8.05.  Regulations...............................................    47
SECTION 8.06.  Voting....................................................    47
SECTION 8.07.  Quorum; Actions...........................................    48
SECTION 8.08.  Written Consent Without a Meeting.........................    48

                                   ARTICLE IX
                             SUPPLEMENTAL INDENTURES

SECTION 9.01.  Supplemental Indentures without Consent of
               Securityholders...........................................    49
SECTION 9.02.  Supplemental Indentures with Consent of Securityholders...    50
SECTION 9.03.  Effect of Supplemental Indentures.........................    51
SECTION 9.04.  Notation on Debt Securities...............................    51
SECTION 9.05.  Evidence of Compliance of Supplemental Indenture to be
               furnished to Trustee......................................    52

                                    ARTICLE X
                            REDEMPTION OF SECURITIES

SECTION 10.01. Optional Redemption.......................................    52
SECTION 10.02. Special Event Redemption..................................    52



                                      -iii-



                                TABLE OF CONTENTS
                                   (CONTINUED)



                                                                            PAGE
                                                                            ----
                                                                         
SECTION 10.03. Notice of Redemption; Selection of Debt Securities........    52
SECTION 10.04. Payment of Debt Securities Called for Redemption..........    53

                                   ARTICLE XI
                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

SECTION 11.01. Company May Consolidate, etc., on Certain Terms...........    54
SECTION 11.02. Successor Entity to be Substituted........................    54
SECTION 11.03. Opinion of Counsel to be Given to Trustee.................    55

                                   ARTICLE XII
                     SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 12.01. Discharge of Indenture....................................    55
SECTION 12.02. Deposited Moneys to be Held in Trust by Trustee...........    56
SECTION 12.03. Paying Agent to Repay Moneys Held.........................    56
SECTION 12.04. Return of Unclaimed Moneys................................    56

                                  ARTICLE XIII
         IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

SECTION 13.01. Indenture and Debt Securities Solely Corporate
               Obligations...............................................    57

                                   ARTICLE XIV
                            MISCELLANEOUS PROVISIONS

SECTION 14.01. Successors................................................    57
SECTION 14.02. Official Acts by Successor Entity.........................    57
SECTION 14.03. Surrender of Company Powers...............................    57
SECTION 14.04. Addresses for Notices, etc................................    57
SECTION 14.05. Governing Law.............................................    58
SECTION 14.06. Evidence of Compliance with Conditions Precedent..........    58
SECTION 14.07. Non-Business Days.........................................    58
SECTION 14.08. Table of Contents, Headings, etc..........................    59
SECTION 14.09. Execution in Counterparts.................................    59
SECTION 14.10. Severability..............................................    59
SECTION 14.11. Assignment................................................    59
SECTION 14.12. Acknowledgment of Rights..................................    59



                                      -iv-



                                TABLE OF CONTENTS
                                   (CONTINUED)



                                                                            PAGE
                                                                            ----
                                                                         
                                   ARTICLE XV
                        SUBORDINATION OF DEBT SECURITIES

SECTION 15.01. Agreement to Subordinate..................................    60
SECTION 15.02. Default on Senior Indebtedness............................    60
SECTION 15.03. Liquidation; Dissolution; Bankruptcy......................    61
SECTION 15.04. Subrogation...............................................    62
SECTION 15.05. Trustee to Effectuate Subordination.......................    63
SECTION 15.06. Notice by the Company.....................................    63
SECTION 15.07. Rights of the Trustee, Holders of Senior Indebtedness.....    64
SECTION 15.08. Subordination May Not Be Impaired.........................    64


EXHIBITS

EXHIBIT A FORM OF DEBT SECURITY


                                      -v-


          THIS INDENTURE, dated as of December 28, 2006, between Independent
Bank Corp., a bank holding company incorporated in Massachusetts (hereinafter
sometimes called the "Company"), and LaSalle Bank National Association as
trustee (hereinafter sometimes called the "Trustee").

                                   WITNESSETH:

          WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issuance of its Junior Subordinated Debt Securities due March 15,
2037 (the "Debt Securities") under this Indenture and to provide, among other
things, for the execution and authentication, delivery and administration
thereof, the Company has duly authorized the execution of this Indenture.

          NOW, THEREFORE, in consideration of the premises, and the purchase of
the Debt Securities by the holders thereof, the Company covenants and agrees
with the Trustee for the equal and proportionate benefit of the respective
holders from time to time of the Debt Securities as follows:

                                   ARTICLE I

                                   DEFINITIONS

     SECTION 1.01. Definitions.

          The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture and of any indenture supplemental hereto shall have the
respective meanings specified in this Section 1.01. All accounting terms used
herein and not expressly defined shall have the meanings assigned to such terms
in accordance with generally accepted accounting principles and the term
"generally accepted accounting principles" means such accounting principles as
are generally accepted in the United States at the time of any computation. The
words "herein," "hereof" and "hereunder" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or other
subdivision.

          "Additional Interest" shall have the meaning set forth in Section
3.06.

          "Additional Provisions" shall have the meaning set forth in Section
15.01.

          "Authenticating Agent" means any agent or agents of the Trustee which
at the time shall be appointed and acting pursuant to Section 6.12.

          "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.

          "Board of Directors" means the board of directors or the executive
committee or any other duly authorized designated officers of the Company.



          "Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.

          "Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions in Wilmington, Delaware, New York City
or the city of the Principal Office of the Trustee or the Company are permitted
or required by any applicable law or executive order to close.

          "Calculation Agent" means the Person identified as "Trustee" in the
first paragraph hereof with respect to the Debt Securities and the Institutional
Trustee with respect to the Trust Securities.

          "Capital Securities" means undivided beneficial interests in the
assets of the Trust which are designated as "TP Securities" and rank pari passu
with Common Securities issued by the Trust; provided, however, that if an Event
of Default (as defined in the Declaration) has occurred and is continuing, the
rights of holders of such Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of such Capital Securities. The Capital
Securities sold by the Trust to the initial purchasers pursuant to the Placement
Agreement and the Capital Securities Purchase Agreements shall be issued in book
entry form, registered in the name of Cede & Co., as nominee on behalf of the
Depository Trust Company, without coupons, and held by the Institutional Trustee
as custodian for the Depository Trust Company.

          "Capital Securities Guarantee" means the guarantee agreement that the
Company will enter into with LaSalle Bank National Association or other Persons
that operates directly or indirectly for the benefit of holders of Capital
Securities of the Trust.

          "Capital Treatment Event" means, if the Company is organized and
existing under the laws of the United States or any state thereof or the
District of Columbia, the receipt by the Company and the Trust of an Opinion of
Counsel experienced in such matters to the effect that, as a result of (a) any
amendment to, or change in, the laws, rules or regulations of the United States
or any political subdivision thereof or therein, or any rules, guidelines or
policies of any applicable regulatory authority for the Company or (b) any
official or administrative pronouncement or action or decision interpreting or
applying such laws, rules or regulations, which amendment or change is effective
or which pronouncement, action or decision is announced on or after the date of
original issuance of the Debt Securities, there is more than an insubstantial
risk that, within 90 days of the receipt of such opinion, the aggregate
Liquidation Amount of the Capital Securities will not be eligible to be treated
by the Company as "Tier 1 Capital" (or the then equivalent thereof) for purposes
of the capital adequacy guidelines of the Federal Reserve (or any successor
regulatory authority with jurisdiction over bank or financial holding
companies), as then in effect and applicable to the Company (or if the Company
is not a bank holding company, such guidelines applied to the Company as if the
Company were subject to such guidelines); provided, however, that the inability
of the Company to treat all or any portion of the aggregate Liquidation Amount
of the Capital Securities as Tier 1 Capital shall not constitute the basis for a
Capital Treatment Event, if such inability results from the Company having
cumulative preferred stock, minority interests in consolidated subsidiaries, or
any other


                                      -2-



class of security or interest which the Federal Reserve or OTS, as
applicable, may now or hereafter accord Tier 1 Capital treatment in excess of
the amount which may now or hereafter qualify for treatment as Tier 1 Capital
under applicable capital adequacy guidelines; provided further, however, that
the distribution of the Debt Securities in connection with the liquidation of
the Trust by the Company shall not in and of itself constitute a Capital
Treatment Event unless such liquidation shall have occurred in connection with a
Tax Event or an Investment Company Event.

          "Certificate" means a certificate signed by any one of the principal
executive officer, the principal financial officer or the principal accounting
officer of the Company.

          "Common Securities" means undivided beneficial interests in the assets
of the Trust which are designated as "Common Securities" and rank pari passu
with Capital Securities issued by the Trust; provided, however, that if an Event
of Default (as defined in the Declaration) has occurred and is continuing, the
rights of holders of such Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of such Capital Securities.

          "Company" means Independent Bank Corp., a bank holding company
incorporated in Massachusetts, and, subject to the provisions of Article XI,
shall include its successors and assigns.

          "Debt Security" or "Debt Securities" has the meaning stated in the
first recital of this Indenture.

          "Debt Security Register" has the meaning specified in Section 2.05.

          "Debt Security Registrar" has the meaning specified in Section 2.05.

          "Declaration" means the Amended and Restated Declaration of Trust of
the Trust dated as of December 28, 2006, as amended or supplemented from time to
time.

          "Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.

          "Defaulted Interest" has the meaning set forth in Section 2.08.

          "Deferred Interest" has the meaning set forth in Section 2.11.

          "Depositary" means an organization registered as a clearing agency
under the Exchange Act that is designated as Depositary by the Company or any
successor thereto. DTC will be the initial Depositary.

          "Depositary Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Depositary effects
book-entry transfers and pledges of securities deposited with the Depositary.

          "DTC" means The Depository Trust Company, a New York corporation.


                                      -3-



          "Event of Default" means any event specified in Section 5.01, which
has continued for the period of time, if any, and after the giving of the
notice, if any, therein designated.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.

          "Extension Period" has the meaning set forth in Section 2.11.

          "Federal Reserve" means the Board of Governors of the Federal Reserve
System.

          "Global Debenture" means a security that evidences all or part of the
Debt Securities, the ownership and transfers of which shall be made through book
entries by a Depositary.

          "Indenture" means this instrument as originally executed or, if
amended or supplemented as herein provided, as so amended or supplemented, or
both.

          "Initial Purchaser" means the initial purchaser of the Capital
Securities.

          "Institutional Trustee" has the meaning set forth in the Declaration.

          "Interest Payment Date" means March 15, June 15, September 15 and
December 15 of each year, commencing on March 15, 2007, during the term of this
Indenture.

          "Interest Payment Period" means the period from and including an
Interest Payment Date, or in the case of the first Interest Payment Period, the
original date of issuance of the Debt Securities, to, but excluding, the next
succeeding Interest Payment Date or, in the case of the last Interest Payment
Period, the Redemption Date, Special Redemption Date or Maturity Date, as the
case may be.

          "Interest Rate" means, with respect to any Interest Payment Period, a
per annum rate of interest, equal to LIBOR, as determined on the LIBOR
Determination Date for such Interest Payment Date, plus 1.48%; provided,
however, that the Interest Rate for any Interest Payment Period may not exceed
the highest rate permitted by New York law, as the same may be modified by
United States law of general applicability.

          "Investment Company Event" means the receipt by the Company and the
Trust of an Opinion of Counsel experienced in such matters to the effect that,
as a result of a change in law or regulation or written change in interpretation
or application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
the Trust is or, within 90 days of the date of such opinion will be, considered
an "investment company" that is required to be registered under the Investment
Company Act of 1940, as amended, which change or prospective change becomes
effective or would become effective, as the case may be, on or after the date of
the original issuance of the Debt Securities.


                                      -4-



          "LIBOR" means the London Interbank Offered Rate for U.S. Dollar
deposits in Europe as determined by the Calculation Agent according to Section
2.10(b).

          "LIBOR Banking Day" has the meaning set forth in Section 2.10(b)(1).

          "LIBOR Business Day" has the meaning set forth in Section 2.10(b)(1).

          "LIBOR Determination Date" has the meaning set forth in Section
2.10(b).

          "Liquidation Amount" means the liquidation amount of $1,000 per Trust
Security.

          "Maturity Date" means March 15, 2037.

          "Notice" has the meaning set forth in Section 2.11.

          "Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Vice Chairman, the President or any Vice President, and by the
Chief Financial Officer, the Treasurer, an Assistant Treasurer, the Comptroller,
an Assistant Comptroller, the Secretary or an Assistant Secretary of the
Company, and delivered to the Trustee. Each such certificate shall include the
statements provided for in Section 14.06 if and to the extent required by the
provisions of such Section.

          "Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, or may be other
counsel reasonably satisfactory to the Trustee. Each such opinion shall include
the statements provided for in Section 14.06 if and to the extent required by
the provisions of such Section.

          "OTS" means the Office of Thrift Supervision and any successor federal
agency that is primarily responsible for regulating the activities of savings
and loan holding companies.

          "Outstanding" means, when used with reference to Debt Securities,
subject to the provisions of Section 7.04, as of any particular time, all Debt
Securities authenticated and delivered by the Trustee or the Authenticating
Agent under this Indenture, except

          (a) Debt Securities theretofore canceled by the Trustee or the
Authenticating Agent or delivered to the Trustee for cancellation;

          (b) Debt Securities, or portions thereof, for the payment or
redemption of which moneys in the necessary amount shall have been deposited in
trust with the Trustee or with any Paying Agent (other than the Company) or
shall have been set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent); provided, that, if such Debt Securities, or
portions thereof, are to be redeemed prior to maturity thereof, notice of such
redemption shall have been given as provided in Articles X and XIV or provision
satisfactory to the Trustee shall have been made for giving such notice; and

          (c) Debt Securities paid pursuant to Section 2.06 or in lieu of or in
substitution for which other Debt Securities shall have been authenticated and
delivered pursuant


                                      -5-



to the terms of Section 2.06 unless proof satisfactory to the Company and the
Trustee is presented that any such Debt Securities are held by bona fide holders
in due course.

          "Paying Agent" has the meaning set forth in Section 3.04(e).

          "Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

          "Placement Agent" means Cohen & Company.

          "Predecessor Security" of any particular Debt Security means every
previous Debt Security evidencing all or a portion of the same debt as that
evidenced by such particular Debt Security; and, for the purposes of this
definition, any Debt Security authenticated and delivered under Section 2.06 in
lieu of a lost, destroyed or stolen Debt Security shall be deemed to evidence
the same debt as the lost, destroyed or stolen Debt Security.

          "Principal Office of the Trustee" means the office of the Trustee, at
which at any particular time its corporate trust business shall be principally
administered, which at all times shall be located within the United States and
at the time of the execution of this Indenture shall be 135 S. LaSalle Street,
Suite 1511, Chicago, Illinois 60603, Attn: CDO Trust Services Group -
Independent Capital Trust V.

          "Redemption Date" has the meaning set forth in Section 10.01.

          "Redemption Price" means 100% of the principal amount of the Debt
Securities being redeemed plus accrued and unpaid interest on such Debt
Securities to the Redemption Date.

          "Responsible Officer" means, with respect to the Trustee, any officer
within the CDO Trust Services Group in the Principal Office of the Trustee with
direct responsibility for the administration of the Indenture, including any
vice-president, any assistant vice-president, any secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or other
officer of the Principal Office of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.

          "Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor legislation.

          "Securityholder," "holder of Debt Securities" or other similar terms,
means any Person in whose name at the time a particular Debt Security is
registered on the Debt Security Register.

          "Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of the
Company for money borrowed and (B) indebtedness evidenced by securities,
debentures, notes, bonds or other similar


                                      -6-



instruments issued by the Company; (ii) all capital lease obligations of the
Company; (iii) all obligations of the Company issued or assumed as the deferred
purchase price of property, all conditional sale obligations of the Company and
all obligations of the Company under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(iv) all obligations of the Company for the reimbursement of any letter of
credit, any banker's acceptance, any security purchase facility, any repurchase
agreement or similar arrangement, any interest rate swap, any other hedging
arrangement, any obligation under options or any similar credit or other
transaction; (v) all obligations of the type referred to in clauses (i) through
(iv) above of other Persons for the payment of which the Company is responsible
or liable as obligor, guarantor or otherwise; and (vi) all obligations of the
type referred to in clauses (i) through (v) above of other Persons secured by
any lien on any property or asset of the Company (whether or not such obligation
is assumed by the Company), whether incurred on or prior to the date of this
Indenture or thereafter incurred, unless, with the prior approval of the Federal
Reserve if not otherwise generally approved, it is provided in the instrument
creating or evidencing the same or pursuant to which the same is outstanding,
that such obligations are not superior or are pari passu in right of payment to
the Debt Securities; provided, however, that Senior Indebtedness shall not
include (A) any debt securities issued to any trust other than the Trust (or a
trustee of such trust) that is a financing vehicle of the Company (a "financing
entity"), in connection with the issuance by such financing entity of equity or
other securities in transactions substantially similar in structure to the
transactions contemplated hereunder and in the Declaration, (B) any guarantees
of the Company in respect of the equity or other securities of any financing
entity referred to in clause (A) above or (C) any other instruments classified
as subordinated or pari passu to the Debt Securities by the Federal Reserve from
time to time hereafter.

          "Special Event" means any of a Tax Event, an Investment Company Event
or a Capital Treatment Event.

          "Special Redemption Date" has the meaning set forth in Section 10.02.

          "Special Redemption Price" means, with respect to the redemption of
any Debt Security following a Special Event, an amount in cash equal to 103.525%
of the principal amount of Debt Securities to be redeemed prior to March 15,
2008 and thereafter equal to the percentage of the principal amount of the Debt
Securities that is specified below for the Special Redemption Date plus, in each
case, unpaid interest accrued thereon to the Special Redemption Date:



  Special Redemption During the
12-Month Period Beginning March 15   Percentage of Principal Amount
- ----------------------------------   ------------------------------
                                  
               2008                             103.140%
               2009                             102.355%
               2010                             101.570%
               2011                             100.785%
        2012 and thereafter                     100.000%



                                      -7-



          "Subsidiary" means, with respect to any Person, (i) any corporation,
at least a majority of the outstanding voting stock of which is owned, directly
or indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of the outstanding partnership or
similar interests of which shall at the time be owned by such Person, or by one
or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries, and (iii) any limited partnership of which such Person or any of
its Subsidiaries is a general partner. For the purposes of this definition,
"voting stock" means shares, interests, participations or other equivalents in
the equity interest (however designated) in such Person having ordinary voting
power for the election of a majority of the directors (or the equivalent) of
such Person, other than shares, interests, participations or other equivalents
having such power only by reason of the occurrence of a contingency.

          "Tax Event" means the receipt by the Company and the Trust of an
Opinion of Counsel experienced in such matters to the effect that, as a result
of any amendment to or change (including any announced prospective change) in
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement (including any private letter ruling,
technical advice memorandum, regulatory procedure, notice or announcement (an
"Administrative Action")) or judicial decision interpreting or applying such
laws or regulations, regardless of whether such Administrative Action or
judicial decision is issued to or in connection with a proceeding involving the
Company or the Trust and whether or not subject to review or appeal, which
amendment, clarification, change, Administrative Action or decision is enacted,
promulgated or announced, in each case on or after the date of original issuance
of the Debt Securities, there is more than an insubstantial risk that: (i) the
Trust is, or will be within 90 days of the date of such opinion, subject to
United States federal income tax with respect to income received or accrued on
the Debt Securities; (ii) if the Company is organized and existing under the
laws of the United States or any state thereof or the District of Columbia,
interest payable by the Company on the Debt Securities is not, or within 90 days
of the date of such opinion, will not be, deductible by the Company, in whole or
in part, for United States federal income tax purposes; or (iii) the Trust is,
or will be within 90 days of the date of such opinion, subject to or otherwise
required to pay, or required to withhold from distributions to holders of Trust
Securities, more than a de minimis amount of other taxes (including withholding
taxes), duties, assessments or other governmental charges.

          "Trust" means Independent Capital Trust V, the Delaware statutory
trust, or any other similar trust created for the purpose of issuing Capital
Securities in connection with the issuance of Debt Securities under this
Indenture, of which the Company is the sponsor.

          "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time-to-time, or any successor legislation.

          "Trust Securities" means Common Securities and Capital Securities of
Independent Capital Trust V.


                                      -8-



          "Trustee" means the Person identified as "Trustee" in the first
paragraph hereof, and, subject to the provisions of Article VI hereof, shall
also include its successors and assigns as Trustee hereunder.

          "United States" means the United States of America and the District of
Columbia.

          "U.S. Person" has the meaning given to United States Person as set
forth in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended.

                                   ARTICLE II

                                 DEBT SECURITIES

     SECTION 2.01. Authentication and Dating.

          Upon the execution and delivery of this Indenture, or from time to
time thereafter, Debt Securities in an aggregate principal amount not in excess
of $51,547,000 may be executed and delivered by the Company to the Trustee for
authentication, and the Trustee shall thereupon authenticate and make available
for delivery said Debt Securities to or upon the written order of the Company,
signed by its Chairman of the Board of Directors, Vice Chairman, President or
Chief Financial Officer or one of its Vice Presidents, without any further
action by the Company hereunder. In authenticating such Debt Securities, and
accepting the additional responsibilities under this Indenture in relation to
such Debt Securities, the Trustee shall be entitled to receive, and (subject to
Section 6.01) shall be fully protected in relying upon a copy of any Board
Resolution or Board Resolutions relating thereto and, if applicable, an
appropriate record of any action taken pursuant to such resolution, in each case
certified by the Secretary or an Assistant Secretary or other officers with
appropriate delegated authority of the Company as the case may be.

          The Trustee shall have the right to decline to authenticate and
deliver any Debt Securities under this Section if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken or if a
Responsible Officer of the Trustee in good faith shall determine that such
action would expose the Trustee to personal liability to existing
Securityholders. The Trustee shall also be entitled to receive an opinion of
counsel to the effect that (1) all conditions precedent to the execution,
delivery and authentication of the Securities have been complied with; (2) the
Securities are not required to be registered under the Securities Act; and (3)
the Indenture is not required to be qualified under the Trust Indenture Act.

          The definitive Debt Securities shall be typed, printed, lithographed
or engraved on steel engraved borders or may be produced in any other manner,
all as determined by the officers executing such Debt Securities, as evidenced
by their execution of such Debt Securities.

     SECTION 2.02. Form of Trustee's Certificate of Authentication.

          The Trustee's certificate of authentication on all Debt Securities
shall be in substantially the following form:

          This represents Debt Securities referred to in the within-mentioned
Indenture.


                                      -9-



          LaSalle Bank National Association, not in its individual capacity but
solely as Trustee


                                        By
                                           -------------------------------------
                                           Authorized Signatory

     SECTION 2.03. Form and Denomination of Debt Securities.

          The Debt Securities shall be substantially in the form of Exhibit A
hereto. The Debt Securities shall be in registered, certificated form without
coupons and in minimum denominations of $100,000 and any multiple of $1,000 in
excess thereof. The Debt Securities shall be numbered, lettered, or otherwise
distinguished in such manner or in accordance with such plans as the officers
executing the same may determine with the approval of the Trustee as evidenced
by the execution and authentication thereof.

     SECTION 2.04. Execution of Debt Securities.

          The Debt Securities shall be signed in the name and on behalf of the
Company by the manual or facsimile signature of any of its President and Chief
Executive Officer, Chief Financial Officer and Treasurer, General Counsel or
Senior Vice President/Treasury, under its corporate seal (if legally required),
which may be affixed thereto or printed, engraved or otherwise reproduced
thereon, by facsimile or otherwise, and which need not be attested. Only such
Debt Securities as shall bear thereon a certificate of authentication
substantially in the form herein before recited, executed by the Trustee or the
Authenticating Agent by the manual signature of an authorized officer, shall be
entitled to the benefits of this Indenture or be valid or obligatory for any
purpose. Such certificate by the Trustee or the Authenticating Agent upon any
Debt Security executed by the Company shall be conclusive evidence that the Debt
Security so authenticated has been duly authenticated and delivered hereunder
and that the Securityholder is entitled to the benefits of this Indenture.

          In case any officer of the Company who shall have signed any of the
Debt Securities shall cease to be such officer before the Debt Securities so
signed shall have been authenticated and delivered by the Trustee or the
Authenticating Agent, or disposed of by the Company, such Debt Securities
nevertheless may be authenticated and delivered or disposed of as though the
Person who signed such Debt Securities had not ceased to be such officer of the
Company; and any Debt Security may be signed on behalf of the Company by such
Persons as, at the actual date of the execution of such Debt Security, shall be
the proper officers of the Company, although at the date of the execution of
this Indenture any such person was not such an officer.

          Every Debt Security shall be dated the date of its authentication.

     SECTION 2.05. Exchange and Registration of Transfer of Debt Securities.

          The Trustee, in its capacity as "Debt Security Registrar", shall cause
to be kept, at the office or agency maintained for the purpose of registration
of transfer and for exchange as provided in Section 3.02, a register (the "Debt
Security Register") for the Debt Securities issued hereunder in which, subject
to such reasonable regulations as it may prescribe, the Debt Security


                                      -10-



Registrar shall provide for the registration and transfer of all Debt Securities
as provided in this Article II. Such register shall be in written form or in any
other form capable of being converted into written form within a reasonable
time.

          Debt Securities to be exchanged may be surrendered at the Principal
Office of the Trustee or at any office or agency to be maintained by the Company
for such purpose as provided in Section 3.02, and the Company shall execute, the
Company or the Trustee shall register and the Trustee or the Authenticating
Agent shall authenticate and make available for delivery in exchange therefor
the Debt Security or Debt Securities which the Securityholder making the
exchange shall be entitled to receive. Upon due presentment for registration of
transfer of any Debt Security at the Principal Office of the Trustee or at any
office or agency of the Company maintained for such purpose as provided in
Section 3.02, the Company shall execute, the Company or the Trustee shall
register and the Trustee or the Authenticating Agent shall authenticate and make
available for delivery in the name of the transferee or transferees a new Debt
Security for a like aggregate principal amount. Registration or registration of
transfer of any Debt Security by the Trustee or by any agent of the Company
appointed pursuant to Section 3.02, and delivery of such Debt Security, shall be
deemed to complete the registration or registration of transfer of such Debt
Security.

          All Debt Securities presented for registration of transfer or for
exchange or payment shall (if so required by the Company or the Trustee or the
Authenticating Agent) be duly endorsed by, or be accompanied by, a written
instrument or instruments of transfer in form satisfactory to the Company and
either the Trustee or the Authenticating Agent duly executed by, the
Securityholder or such Securityholder's attorney duly authorized in writing.

          Neither the Trustee nor the Debt Security Registrar shall be
responsible for ascertaining whether any transfer hereunder complies with the
registration provisions of or any exemptions from the Securities Act (under and
as defined in the Declaration), applicable state securities laws or the
applicable laws of any other jurisdiction, ERISA, the United States Internal
Revenue Code of 1986, as amended, or the Investment Company Act (under and as
defined in the Declaration).

          No service charge shall be made for any exchange or registration of
transfer of Debt Securities, but the Company or the Trustee may require payment
of a sum sufficient to cover any tax, fee or other governmental charge that may
be imposed in connection therewith.

          The Company or the Trustee shall not be required to exchange or
register a transfer of any Debt Security for a period of 15 days immediately
preceding the date of selection of Debt Securities for redemption.

          Notwithstanding the foregoing, Debt Securities may not be transferred
except in compliance with the restricted securities legend set forth below,
unless otherwise determined by the Company in accordance with applicable law,
which legend shall be placed on each Debt Security:

          THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES


                                      -11-



LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY
(A) TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO A "NON U.S. PERSON" IN
AN "OFFSHORE TRANSACTION" PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (D)
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2),
(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE
INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.

          THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES,
REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS
INVOLVING THIS SECURITY UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE
SECURITIES ACT OR AN APPLICABLE EXEMPTION THEREFROM.

          THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),
(EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY
REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN
ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE


                                      -12-



EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION
CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE
EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE
OR HOLDING. ANY PURCHASER OR HOLDER OF THIS SECURITY OR ANY INTEREST THEREIN
WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT
EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3)
OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE
OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY
OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO
FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH
THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

          IN CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SECURITY WILL
DELIVER TO THE COMPANY AND TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS
MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.

          THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING A PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN
EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A
PRINCIPAL AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO
LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE
THE HOLDER OF THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE
RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL
BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.

          THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED
STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT
INSURANCE CORPORATION. THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF
DEPOSITORS AND THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS
INELIGIBLE AS COLLATERAL FOR A LOAN BY THE COMPANY OR ANY OF ITS SUBSIDIARIES
AND IS NOT SECURED.

     SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Debt Securities.

          In case any Debt Security shall become mutilated or be destroyed, lost
or stolen, the Company shall execute, and upon its written request the Trustee
shall authenticate and deliver, a new Debt Security bearing a number not
contemporaneously outstanding, in exchange and substitution for the mutilated
Debt Security, or in lieu of and in substitution for the Debt Security so
destroyed, lost or stolen. In every case the applicant for a substituted Debt
Security


                                      -13-



shall furnish to the Company and the Trustee such security or indemnity as may
be required by them to save each of them harmless, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Company and
the Trustee evidence to their satisfaction of the destruction, loss or theft of
such Debt Security and of the ownership thereof.

          The Trustee may authenticate any such substituted Debt Security and
deliver the same upon the written request or authorization of any officer of the
Company. Upon the issuance of any substituted Debt Security, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Debt Security which has matured or is about to mature or
has been called for redemption in full shall become mutilated or be destroyed,
lost or stolen, the Company may, instead of issuing a substitute Debt Security,
pay or authorize the payment of the same (without surrender thereof except in
the case of a mutilated Debt Security) if the applicant for such payment shall
furnish to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless and, in case of destruction, loss
or theft, evidence satisfactory to the Company and to the Trustee of the
destruction, loss or theft of such Security and of the ownership thereof.

          Every substituted Debt Security issued pursuant to the provisions of
this Section 2.06 by virtue of the fact that any such Debt Security is
destroyed, lost or stolen shall constitute an additional contractual obligation
of the Company, whether or not the destroyed, lost or stolen Debt Security shall
be found at any time, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Debt Securities
duly issued hereunder. All Debt Securities shall be held and owned upon the
express condition that, to the extent permitted by applicable law, the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Debt Securities and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.

     SECTION 2.07. Temporary Debt Securities.

          Pending the preparation of definitive Debt Securities, the Company may
execute and the Trustee shall authenticate and make available for delivery
temporary Debt Securities that are typed, printed or lithographed. Temporary
Debt Securities shall be issuable in any authorized denomination, and
substantially in the form of the definitive Debt Securities but with such
omissions, insertions and variations as may be appropriate for temporary Debt
Securities, all as may be determined by the Company. Every such temporary Debt
Security shall be executed by the Company and be authenticated by the Trustee
upon the same conditions and in substantially the same manner, and with the same
effect, as the definitive Debt Securities. Without unreasonable delay, the
Company will execute and deliver to the Trustee or the Authenticating Agent
definitive Debt Securities and thereupon any or all temporary Debt Securities
may be surrendered in exchange therefor, at the Principal Office of the Trustee
or at any office or agency maintained by the Company for such purpose as
provided in Section 3.02, and the Trustee or the Authenticating Agent shall
authenticate and make available for delivery in exchange for such temporary Debt
Securities a like aggregate principal amount of such definitive Debt Securities.
Such exchange shall be made by the Company at its own expense and without any
charge


                                      -14-



therefor except that in case of any such exchange involving a registration of
transfer the Company may require payment of a sum sufficient to cover any tax,
fee or other governmental charge that may be imposed in relation thereto. Until
so exchanged, the temporary Debt Securities shall in all respects be entitled to
the same benefits under this Indenture as definitive Debt Securities
authenticated and delivered hereunder.

     SECTION 2.08. Payment of Interest.

          Each Debt Security will bear interest at the then applicable Interest
Rate from and including each Interest Payment Date or, in the case of the first
Interest Payment Period, the original date of issuance of such Debt Security to,
but excluding, the next succeeding Interest Payment Date or, in the case of the
last Interest Payment Period, the Redemption Date, Special Redemption Date or
Maturity Date, as applicable, on the principal thereof, on any overdue principal
and (to the extent that payment of such interest is enforceable under applicable
law) on Deferred Interest and on any overdue installment of interest (including
Defaulted Interest), payable on each Interest Payment Date commencing on March
15, 2007. Interest and any Deferred Interest on any Debt Security that is
payable, and is punctually paid or duly provided for by the Company, on any
Interest Payment Date shall be paid to the Person in whose name said Debt
Security (or one or more Predecessor Securities) is registered at the close of
business on the regular record date for such interest installment, except that
interest and any Deferred Interest payable on the Maturity Date, the Redemption
Date (to the extent redeemed) or the Special Redemption Date shall be paid to
the Person to whom principal is paid. In the event that any Debt Security or
portion thereof is called for redemption and the redemption date is subsequent
to a regular record date with respect to any Interest Payment Date and either on
or prior to such Interest Payment Date, interest on such Debt Security will be
paid upon presentation and surrender of such Debt Security.

          Any interest on any Debt Security, other than Deferred Interest, that
is payable, but is not punctually paid or duly provided for by the Company, on
any Interest Payment Date (herein called "Defaulted Interest") shall forthwith
cease to be payable to the registered Securityholder on the relevant regular
record date by virtue of having been such Securityholder, and such Defaulted
Interest shall be paid by the Company to the Persons in whose names such Debt
Securities (or their respective Predecessor Securities) are registered at the
close of business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner: the Company shall notify
the Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each such Debt Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements reasonably satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled to such Defaulted Interest as
in this clause provided. Thereupon the Trustee shall fix a special record date
for the payment of such Defaulted Interest which shall not be more than fifteen
nor less than ten days prior to the date of the proposed payment and not less
than ten days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such special record
date and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the special record date
therefor to be mailed, first class postage prepaid, to each Securityholder at
his


                                      -15-



or her address as it appears in the Debt Security Register, not less than ten
days prior to such special record date. Notice of the proposed payment of such
Defaulted Interest and the special record date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in whose names
such Debt Securities (or their respective Predecessor Securities) are registered
on such special record date and thereafter the Company shall have no further
payment obligation in respect of the Defaulted Interest.

          Any interest scheduled to become payable on an Interest Payment Date
occurring during an Extension Period shall not be Defaulted Interest and shall
be payable on such other date as may be specified in the terms of such Debt
Securities.

          The term "regular record date" as used in this Indenture shall mean
the fifteenth day prior to the applicable Interest Payment Date whether or not
such date is a Business Day.

          Subject to the foregoing provisions of this Section, each Debt
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Debt Security shall carry the rights to
interest accrued and unpaid, and to accrue, that were carried by such other Debt
Security.

     SECTION 2.09. Cancellation of Debt Securities Paid, etc.

          All Debt Securities surrendered for the purpose of payment,
redemption, exchange or registration of transfer, shall, if surrendered to the
Company or any Paying Agent, be surrendered to the Trustee and promptly canceled
by it, or, if surrendered to the Trustee, shall be promptly canceled by it, and
no Debt Securities shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Indenture. The Trustee shall dispose of all
canceled Debt Securities in accordance with its customary practices, unless the
Company otherwise directs the Trustee in writing, in which case the Trustee
shall dispose of such Debt Securities as directed by the Company. If the Company
shall acquire any of the Debt Securities, however, such acquisition shall not
operate as a redemption or satisfaction of the indebtedness represented by such
Debt Securities unless and until the same are surrendered to the Trustee for
cancellation.

     SECTION 2.10. Computation of Interest.

          (a) The amount of interest payable for any Interest Payment Period
will be computed on the basis of a 360-day year and the actual number of days
elapsed in the relevant interest period; provided, however, that upon the
occurrence of a Special Event Redemption pursuant to Section 10.02 the amounts
payable pursuant to this Indenture shall be calculated as set forth in the
definition of Special Redemption Price.

          (b) LIBOR, for any Interest Payment Period, shall be determined by the
Calculation Agent in accordance with the following provisions:

               (1) On the second LIBOR Business Day (provided, that on such day
          commercial banks are open for business (including dealings in foreign
          currency deposits) in London (a "LIBOR Banking Day"), and otherwise
          the next preceding LIBOR Business Day that is also a LIBOR Banking
          Day) prior to March 15, June


                                      -16-



          15, September 15 and December 15 (or, with respect to the first
          Interest Payment Period, on December 22, 2006) (each such day, a
          "LIBOR Determination Date" for the following Interest Payment Period),
          the Calculation Agent shall obtain the rate for three-month U.S.
          Dollar deposits in Europe, which appears on Telerate Page 3750 (as
          defined in the International Swaps and Derivatives Association, Inc.
          2000 Interest Rate and Currency Exchange Definitions) or such other
          page as may replace such Telerate Page 3750 on the Moneyline Telerate,
          Inc. service (or such other service or services as may be nominated by
          the British Banker's Association as the information vendor for the
          purpose of displaying London Interbank offered rates for U.S. dollar
          deposits), as of 11:00 a.m. (London time) on such LIBOR Determination
          Date, and the rate so obtained shall be LIBOR for such Interest
          Payment Period. "LIBOR Business Day" means any day that is not a
          Saturday, Sunday or other day on which commercial banking institutions
          in The City of New York or Chicago, Illinois are authorized or
          obligated by law or executive order to be closed. If such rate is
          superseded on Telerate Page 3750 by a corrected rate before 12:00 noon
          (London time) on the same LIBOR Determination Date, the corrected rate
          as so substituted will be LIBOR for that Interest Payment Period.

               (2) If, on any LIBOR Determination Date, such rate does not
          appear on Telerate Page 3750 or such other page as may replace such
          Telerate Page 3750 on the Moneyline Telerate, Inc. service (or such
          other service or services as may be nominated by the British Banker's
          Association as the information vendor for the purpose of displaying
          London Interbank offered rates for U.S. dollar deposits), the
          Calculation Agent shall determine the arithmetic mean of the offered
          quotations of the Reference Banks (as defined below) to leading banks
          in the London Interbank market for three-month U.S. Dollar deposits in
          Europe (in an amount determined by the Calculation Agent) by reference
          to requests for quotations as of approximately 11:00 a.m. (London
          time) on the LIBOR Determination Date made by the Calculation Agent to
          the Reference Banks. If, on any LIBOR Determination Date, at least two
          of the Reference Banks provide such quotations, LIBOR shall equal the
          arithmetic mean of such quotations. If, on any LIBOR Determination
          Date, only one or none of the Reference Banks provide such a
          quotation, LIBOR shall be deemed to be the arithmetic mean of the
          offered quotations that at least two leading banks in the City of New
          York (as selected by the Calculation Agent) are quoting on the
          relevant LIBOR Determination Date for three-month U.S. Dollar deposits
          in Europe at approximately 11:00 a.m. (London time) (in an amount
          determined by the Calculation Agent). As used herein, "Reference
          Banks" means four major banks in the London Interbank market selected
          by the Calculation Agent.

               (3) If the Calculation Agent is required but is unable to
          determine a rate in accordance with at least one of the procedures
          provided above, LIBOR for the applicable Interest Payment Period shall
          be LIBOR in effect for the immediately preceding Interest Payment
          Period.


                                      -17-



          (c) All percentages resulting from any calculations on the Debt
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward).

          (d) As soon as practicable following each LIBOR Determination Date,
but in no event later than the 30th day following such LIBOR Determination Date,
the Calculation Agent shall notify, in writing, the Company, the Institutional
Trustee and the Paying Agent of the applicable Interest Rate in effect for the
related Interest Payment Period. The Calculation Agent shall, upon the request
of any Securityholder, provide the Interest Rate then in effect. All
calculations made by the Calculation Agent in the absence of manifest error
shall be conclusive for all purposes and binding on the Company and the
Securityholders. Any error in a calculation of the Interest Rate by the
Calculation Agent may be corrected at any time by the delivery of notice of such
corrected Interest Rate as provided above. The Paying Agent shall be entitled to
rely on information received from the Calculation Agent or the Company as to the
Interest Rate. The Company shall, from time to time, provide any necessary
information to the Paying Agent relating to any original issue discount and
interest on the Debt Securities that is included in any payment and reportable
for taxable income calculation purposes. Failure to notify the Company, the
Institutional Trustee or the Paying Agent of the applicable Interest Rate shall
not affect the obligation of the Company to make payment on Debentures at such
Interest Rate.

     SECTION 2.11. Extension of Interest Payment Period.

          So long as no Event of Default pursuant to paragraphs (c), (e), (f) or
(g) of Section 5.01 of the Indenture has occurred and is continuing, the Company
shall have the right under the Indenture, from time to time and without causing
an Event of Default, to defer payments of interest on the Debt Securities by
extending the interest distribution period on the Debt Securities at any time
and from time to time during the term of the Debt Securities, for up to twenty
consecutive quarterly periods (each such extended interest distribution period,
an "Extension Period"), during which Extension Period no interest shall be due
and payable (except any Additional Interest that may be due and payable). No
Extension Period may end on a date other than an Interest Payment Date. During
any Extension Period, interest will continue to accrue on the Debt Securities,
and interest on such accrued interest (such accrued interest and interest
thereon referred to herein as "Deferred Interest") will accrue at an annual rate
equal to the Interest Rate applicable during such Extension Period, compounded
quarterly from the date such Deferred Interest would have been payable were it
not for the Extension Period, to the extent permitted by law. No interest or
Deferred Interest shall be due and payable during an Extension Period, except at
the end thereof. At the end of any such Extension Period the Company shall pay
all Deferred Interest then accrued and unpaid on the Debt Securities; provided,
however, that no Extension Period may extend beyond the Maturity Date,
Redemption Date (to the extent redeemed) or Special Redemption Date; and
provided further, however, that during any such Extension Period, the Company
shall be subject to the restrictions set forth in Section 3.08 of this
Indenture. Prior to the termination of any Extension Period, the Company may
further extend such period, provided, that such period together with all such
previous and further consecutive extensions thereof shall not exceed twenty
consecutive quarterly periods, or extend beyond the Maturity Date, Redemption
Date (to the extent redeemed) or Special Redemption Date. Upon the


                                      -18-



termination of any Extension Period and upon the payment of all Deferred
Interest, the Company may commence a new Extension Period, subject to the
foregoing requirements. No interest or Deferred Interest shall be due and
payable during an Extension Period, except at the end thereof, but Deferred
Interest shall accrue upon each installment of interest that would otherwise
have been due and payable during such Extension Period until such installment is
paid. The Company must give the Trustee notice of its election to begin any
Extension Period or extend an Extension Period ("Notice") not later than the
related regular record date for the relevant Interest Payment Date. The Notice
shall describe, in reasonable detail, why the Company has elected to begin an
Extension Period. The Notice shall acknowledge and affirm the Company's
understanding that it is prohibited from issuing dividends and other
distributions during the Extension Period. Upon receipt of the Notice, the
Placement Agent shall have the right, at its sole discretion, to disclose the
name of the Company, the fact that the Company has elected to begin an Extension
Period and other information that such Placement Agent, at its sole discretion,
deems relevant to the Company's election to begin an Extension Period. The
Trustee shall give notice of the Company's election to begin a new Extension
Period to the Securityholders.

     SECTION 2.12. CUSIP Numbers.

          The Company in issuing the Debt Securities may use a "CUSIP" number
(if then generally in use), and, if so, the Trustee shall use a "CUSIP" number
in notices of redemption as a convenience to Securityholders; provided, that any
such notice may state that no representation is made as to the correctness of
such number either as printed on the Debt Securities or as contained in any
notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Debt Securities, and any such redemption
shall not be affected by any defect in or omission of such numbers. The Company
will promptly notify the Trustee in writing of any change in the CUSIP number.

     SECTION 2.13. Income Tax Certification.

          As a condition to the payment of any principal of or interest on the
Debt Securities without the imposition of withholding tax, the Trustee shall
require the previous delivery of properly completed and signed applicable U.S.
federal income tax certifications (generally, an Internal Revenue Service Form
W-9 (or applicable successor form) in the case of a person that is a "United
States person" within the meaning of Section 7701 (a)(30) of the Code (under and
as defined in the Declaration) or an Internal Revenue Service Form W-8 (or
applicable successor form) in the case of a person that is not a "United States
person" within the meaning of Section 7701(a)(30) of the Code, and any other
certification acceptable to it to enable the Trustee or any Paying Agent to
determine their respective duties and liabilities with respect to any taxes or
other charges that they may be required to pay, deduct or withhold in respect of
such Debt Securities.

     SECTION 2.14. Global Debentures.

          (a) Upon the election of the holder of Outstanding Debt Securities,
which election need not be in writing, the Debt Securities owned by such holder
shall be issued in the form of one or more Global Debentures registered in the
name of the Depositary or its nominee. Each Global Debenture issued under this
Indenture shall be registered in the name of the


                                      -19-



Depositary designated by the Company for such Global Debenture or a nominee
thereof and delivered to such Depositary or a nominee thereof or custodian
therefor, and each such Global Debenture shall constitute a single Debt Security
for all purposes of this Indenture.

          (b) Notwithstanding any other provision in this Indenture, no Global
Debenture may be exchanged in whole or in part for Debt Securities registered,
and no transfer of a Global Debenture in whole or in part may be registered, in
the name of any Person other than the Depositary for such Global Debenture or a
nominee thereof unless (i) such Depositary advises the Trustee and the Company
in writing that such Depositary is no longer willing or able to properly
discharge its responsibilities as Depositary with respect to such Global
Debenture, and no qualified successor is appointed by the Company within ninety
(90) days of receipt by the Company of such notice, (ii) such Depositary ceases
to be a clearing agency registered under the Exchange Act and no successor is
appointed by the Company within ninety (90) days after obtaining knowledge of
such event, (iii) the Company executes and delivers to the Trustee a company
order stating that the Company elects to terminate the book-entry system through
the Depositary or (iv) an Event of Default shall have occurred and be
continuing. Upon the occurrence of any event specified in clause (i), (ii),
(iii) or (iv) above, the Trustee shall notify the Depositary and instruct the
Depositary to notify all owners of beneficial interests in such Global Debenture
of the occurrence of such event and of the availability of Debt Securities to
such owners of beneficial interests requesting the same. Upon the issuance of
such Debt Securities and the registration in the Debt Security Register of such
Debt Securities in the names of such owners of the beneficial interests therein,
the Trustee shall recognize such owners of beneficial interests as holders
hereof.

          (c) If any Global Debenture is to be exchanged for other Debt
Securities or canceled in part, or if another Debt Security is to be exchanged
in whole or in part for a beneficial interest in any Global Debenture, then
either (i) such Global Debenture shall be so surrendered for exchange or
cancellation as provided in this Article II or (ii) the principal amount thereof
shall be reduced or increased by an amount equal to the portion thereof to be so
exchanged or canceled, or equal to the principal amount of such other Debt
Security to be so exchanged for a beneficial interest therein, as the case may
be, by means of an appropriate adjustment made on the records of the Debt
Security Registrar, whereupon the Trustee, in accordance with the applicable
depository procedures, shall instruct the Depositary or its authorized
representative to make a corresponding adjustment to its records. Upon any such
surrender or adjustment of a Global Debenture by the Depositary, accompanied by
registration instructions, the Company shall execute and the Trustee shall
authenticate and deliver any Debt Securities issuable in exchange for such
Global Debenture (or any portion thereof) in accordance with the instructions of
the Depositary. The Trustee shall not be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be fully protected in
relying on, such instructions.

          (d) Every Debt Security authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Debenture or any
portion thereof shall be authenticated and delivered in the form of, and shall
be, a Global Debenture, unless such Debt Security is registered in the name of a
Person other than the Depositary for such Global Debenture or a nominee thereof.


                                      -20-



          (e) Debt Securities distributed to holders of Book-Entry Capital
Securities (as defined in the Trust Agreement) upon the dissolution of the Trust
shall be distributed in the form of one or more Global Debentures registered in
the name of a Depositary or its nominee, and deposited with the Debt Security
Registrar, as custodian for such Depositary, or with such Depositary, for credit
by the Depositary to the respective accounts of the beneficial owners of the
Debt Securities represented thereby (or such other accounts as they may direct).
Debt Securities distributed to holders of Capital Securities other than
Book-Entry Capital Securities upon the dissolution of the Trust shall not be
issued in the form of a Global Debenture or any other form intended to
facilitate book-entry trading in beneficial interests in such Debt Securities.

          (f) The Depositary or its nominee, as the registered owner of a Global
Debenture, shall be the holder of such Global Debenture for all purposes under
this Indenture and the Debt Securities, and owners of beneficial interests in a
Global Debenture shall hold such interests pursuant to the Applicable Depository
Procedures. Accordingly, any such owner's beneficial interest in a Global
Debenture shall be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee or
its Depositary Participants. The Debt Security Registrar and the Trustee shall
be entitled to deal with the Depositary for all purposes of this Indenture
relating to a Global Debenture (including the payment of principal and interest
thereon and the giving of instructions or directions by owners of beneficial
interests therein and the giving of notices) as the sole holder of the Debt
Security and shall have no obligations to the owners of beneficial interests
therein. Neither the Trustee nor the Debt Security Registrar shall have any
liability in respect of any transfers affected by the Depositary.

          (g) The rights of owners of beneficial interests in a Global Debenture
shall be exercised only through the Depositary and shall be limited to those
established by law and agreements between such owners and the Depositary and/or
its Depositary Participants.

          (h) No holder of any beneficial interest in any Global Debenture held
on its behalf by a Depositary shall have any rights under this Indenture with
respect to such Global Debenture, and such Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the owner of
such Global Debenture for all purposes whatsoever. None of the Company, the
Trustee nor any agent of the Company or the Trustee will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests of a Global Debenture or maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by a
Depositary or impair, as between a Depositary and such holders of beneficial
interests, the operation of customary practices governing the exercise of the
rights of the Depositary (or its nominee) as holder of any Debt Security.


                                      -21-



                                  ARTICLE III

                       PARTICULAR COVENANTS OF THE COMPANY

     SECTION 3.01. Payment of Principal, Premium and Interest; Agreed Treatment
of the Debt Securities.

          (a) The Company covenants and agrees that it will duly and punctually
pay or cause to be paid all payments due on the Debt Securities at the place, at
the respective times and in the manner provided in this Indenture and the Debt
Securities. At the option of the Company, each installment of interest on the
Debt Securities may be paid (i) by mailing checks for such interest payable to
the order of the Securityholders entitled thereto as they appear on the Debt
Security Register or (ii) by wire transfer to any account with a banking
institution located in the United States designated by such Securityholders to
the Paying Agent no later than the related record date. Notwithstanding anything
to the contrary contained in this Indenture or any Debt Security, if the Trust
or the Trustee of the Trust is the holder of any Debt Security, then all
payments in respect of such Debt Security shall be made by the Company in
immediately available funds when due.

          (b) The Company and each of the Securityholders will treat the Debt
Securities as indebtedness, and the amounts, other than payments of principal,
payable in respect of the principal amount of such Debt Securities as interest,
for all U.S. federal income tax purposes. All payments in respect of the Debt
Securities will be made free and clear of U.S. withholding tax to any beneficial
owner thereof that has provided (i) an Internal Revenue Service Form W-9 or
W-8BEN (or any substitute or successor form) establishing its U.S. or non-U.S.
status for U.S. federal income tax purposes, and establishing a complete
exemption from U.S. withholding tax, or (ii) any other applicable form
establishing a complete exemption from U.S. withholding tax.

          (c) As of the date of this Indenture, the Company represents that it
has no intention to exercise its right under Section 2.11 to defer payments of
interest on the Debt Securities by commencing an Extension Period.

          (d) As of the date of this Indenture, the Company represents that the
likelihood that it would exercise its right under this Indenture to defer
payments of interest on the Debt Securities by commencing an Extension Period at
any time during which the Debt Securities are outstanding is remote because of
the restrictions that would be imposed on the Company's ability to declare or
pay dividends or distributions on, or to redeem, purchase or make a liquidation
payment with respect to, any of its outstanding equity and on the Company's
ability to make any payments of principal of or premium, if any, or interest on,
or repurchase or redeem, any of its debt securities that rank pari passu in all
respects with or junior in interest to the Debt Securities.


                                      -22-



     SECTION 3.02. Offices for Notices and Payments, etc.

          So long as any of the Debt Securities remain outstanding, the Company
will maintain an office or agency where the Debt Securities may be presented for
payment, an office or agency where the Debt Securities may be presented for
registration of transfer and for exchange as provided in this Indenture and an
office or agency where notices and demands to or upon the Company in respect of
the Debt Securities or of this Indenture may be served. The Company hereby
appoints the Trustee as LaSalle Bank National Association, CDO Trust Services
Group, Attn: Greg Myers, 135 South LaSalle Street, Suite 1511, Chicago, Illinois
60603 - Independent Capital Trust V as such office or agency. In case the
Company shall fail to maintain any such office or shall fail to give such notice
of the location or of any change in the location thereof, presentations and
demands may be made and notices may be served at the Principal Office of the
Trustee.

          In addition to any such office or agency, the Company may from time to
time designate one or more other offices or agencies where the Debt Securities
may be presented for registration of transfer and for exchange in the manner
provided in this Indenture, and the Company may from time to time rescind such
designation, as the Company may deem desirable or expedient; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain any such office or agency for the purposes above
mentioned. The Company will give to the Trustee prompt written notice of any
such designation or rescission thereof.

     SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office.

          The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 6.09, a
Trustee, so that there shall at all times be a Trustee hereunder.

     SECTION 3.04. Provision as to Paying Agent.

          (a) If the Company shall appoint a Paying Agent other than the
Trustee, it will cause such Paying Agent to execute and deliver to the Trustee
an instrument in which such agent shall agree with the Trustee, subject to the
provision of this Section 3.04:

               (1) that it will hold all sums held by it as such agent for the
          payment of all payments due on the Debt Securities (whether such sums
          have been paid to it by the Company or by any other obligor on the
          Debt Securities) in trust for the benefit of the Securityholders;

               (2) that it will give the Trustee prompt written notice of any
          failure by the Company (or by any other obligor on the Debt
          Securities) to make any payment on the Debt Securities when the same
          shall be due and payable; and

               (3) that it will, at any time during the continuance of any Event
          of Default, upon the written request of the Trustee, forthwith pay to
          the Trustee all sums so held in trust by such Paying Agent.


                                      -23-



          (b) If the Company shall act as its own Paying Agent, it will, on or
before each due date of the payments due on the Debt Securities, set aside,
segregate and hold in trust for the benefit of the Securityholders a sum
sufficient to pay such payments so becoming due and will notify the Trustee in
writing of any failure to take such action and of any failure by the Company (or
by any other obligor under the Debt Securities) to make any payment on the Debt
Securities when the same shall become due and payable.

          Whenever the Company shall have one or more Paying Agents for the Debt
Securities, it will, on or prior to each due date of the payments on the Debt
Securities, deposit with a Paying Agent a sum sufficient to pay all payments so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto and (unless such Paying Agent is the Trustee) the Company shall
promptly notify the Trustee in writing of its action or failure to act.

          (c) Anything in this Section 3.04 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge with respect to the Debt Securities, or for any other reason, pay, or
direct any Paying Agent to pay to the Trustee all sums held in trust by the
Company or any such Paying Agent, such sums to be held by the Trustee upon the
same terms and conditions herein contained.

          (d) Anything in this Section 3.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 3.04 is subject to
Sections 12.03 and 12.04.

          (e) The Company hereby initially appoints the Trustee to act as Paying
Agent (the "Paying Agent").

     SECTION 3.05. Certificate to Trustee.

          The Company will deliver to the Trustee on or before 120 days after
the end of each fiscal year, so long as Debt Securities are outstanding
hereunder, a Certificate stating that in the course of the performance by the
signers of their duties as officers of the Company they would normally have
knowledge of any default by the Company in the performance of any covenants of
the Company contained herein, stating whether or not they have knowledge of any
such default and, if so, specifying each such default of which the signers have
knowledge and the nature thereof.

     SECTION 3.06. Additional Interest.

          If and for so long as the Trust is the holder of all Debt Securities
and is subject to or otherwise required to pay, or is required to withhold from
distributions to holders of Trust Securities, any additional taxes (including
withholding taxes), duties, assessments or other governmental charges as a
result of a Tax Event, the Company will pay such additional amounts (the
"Additional Interest") on the Debt Securities as shall be required so that the
net amounts received and retained by the Trust for distribution to holders of
Trust Securities after paying all taxes (including withholding taxes), duties,
assessments or other governmental charges will be equal to the amounts the Trust
would have received and retained for distribution to holders of Trust Securities
after paying all taxes (including withholding taxes on distributions to holders
of Trust Securities), duties, assessments or other governmental charges if no
such additional taxes,


                                      -24-



duties, assessments or other governmental charges had been imposed. Whenever in
this Indenture or the Debt Securities there is a reference in any context to the
payment of principal of or premium, if any, or interest on the Debt Securities,
such mention shall be deemed to include mention of payments of the Additional
Interest provided for in this paragraph to the extent that, in such context,
Additional Interest is, was or would be payable in respect thereof pursuant to
the provisions of this paragraph and express mention of the payment of
Additional Interest (if applicable) in any provisions hereof shall not be
construed as excluding Additional Interest in those provisions hereof where such
express mention is not made; provided, however, that, notwithstanding anything
to the contrary contained in this Indenture or any Debt Security, the deferral
of the payment of interest during an Extension Period pursuant to Section 2.11
shall not defer the payment of any Additional Interest that may be due and
payable.

     SECTION 3.07. Compliance with Consolidation Provisions.

          The Company will not, while any of the Debt Securities remain
outstanding, consolidate with, or merge into any other Person, or merge into
itself, or sell, convey, transfer or otherwise dispose of all or substantially
all of its property or capital stock to any other Person unless the provisions
of Article XI hereof are complied with.

     SECTION 3.08. Limitation on Dividends.

          If Debt Securities are initially issued to the Trust or a trustee of
such Trust in connection with the issuance of Trust Securities by the Trust
(regardless of whether Debt Securities continue to be held by such Trust) and
(i) there shall have occurred and be continuing an Event of Default, (ii) the
Company shall be in default with respect to its payment of any obligations under
the Capital Securities Guarantee or (iii) the Company shall have given notice of
its election to defer payments of interest on the Debt Securities by extending
the interest distribution period as provided herein and such period, or any
extension thereof, shall have commenced and be continuing, then the Company may
not (A) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock or (B) make any payment of principal of or interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company that
rank pari passu in all respects with or junior in interest to the Debt
Securities or (C) make any payment under any guarantees of the Company that rank
pari passu in all respects with or junior in interest to the Capital Securities
Guarantee (other than (a) repurchases, redemptions or other acquisitions of
shares of capital stock of the Company (I) in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
one or more employees, officers, directors or consultants, (II) in connection
with a dividend reinvestment or stockholder stock purchase plan or (III) in
connection with the issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock), as consideration in an
acquisition transaction entered into prior to the occurrence of (i), (ii) or
(iii) above, (b) as a result of any exchange, reclassification, combination or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (c) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in


                                      -25-



connection with any stockholder's rights plan, or the issuance of rights, stock
or other property under any stockholder's rights plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks pari passu with or junior to
such stock).

     SECTION 3.09. Covenants as to the Trust.

          For so long as such Trust Securities remain outstanding, the Company
shall maintain 100% ownership of the Common Securities; provided, however, that
any permitted successor of the Company under this Indenture that is a U.S.
Person may succeed to the Company's ownership of such Common Securities. The
Company, as owner of the Common Securities, shall use commercially reasonable
efforts to cause the Trust (a) to remain a statutory trust, except in connection
with a distribution of Debt Securities to the holders of Trust Securities in
liquidation of the Trust, the redemption of all of the Trust Securities or
certain mergers, consolidations or amalgamations, each as permitted by the
Declaration, (b) to otherwise continue to be classified as a grantor trust for
United States federal income tax purposes and (c) to cause each holder of Trust
Securities to be treated as owning an undivided beneficial interest in the Debt
Securities.

                                   ARTICLE IV

                LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

     SECTION 4.01. Securityholders' Lists.

          The Company covenants and agrees that it will furnish or cause to be
furnished to the Trustee:

          (a) on each regular record date for an Interest Payment Date, a list,
in such form as the Trustee may reasonably require, of the names and addresses
of the Securityholders as of such record date; and

          (b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;

except that no such lists need be furnished under this Section 4.01 so long as
the Trustee is in possession thereof by reason of its acting as Debt Security
Registrar.

     SECTION 4.02. Preservation and Disclosure of Lists.

          (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the
Securityholders (1) contained in the most recent list furnished to it as
provided in Section 4.01 or (2) received by it in the capacity of Debt Security
Registrar (if so acting) hereunder. The Trustee may destroy any list furnished
to it as provided in Section 4.01 upon receipt of a new list so furnished.


                                      -26-



          (b) In case three or more Securityholders (hereinafter referred to as
"applicants") apply in writing to the Trustee and furnish to the Trustee
reasonable proof that each such applicant has owned a Debt Security for a period
of at least six months preceding the date of such application, and such
application states that the applicants desire to communicate with other
Securityholders with respect to their rights under this Indenture or under such
Debt Securities and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall
within five Business Days after the receipt of such application, at the election
of the Company, either:

               (1) afford such applicants access to the information preserved at
          the time by the Trustee in accordance with the provisions of
          subsection (a) of this Section 4.02, or

               (2) inform such applicants as to the approximate number of
          Securityholders whose names and addresses appear in the information
          preserved at the time by the Trustee in accordance with the provisions
          of subsection (a) of this Section 4.02, and as to the approximate cost
          of mailing to such Securityholders the form of proxy or other
          communication, if any, specified in such application.

          If the Company shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Securityholder whose name and address appear in the
information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.02 a copy of the form of proxy or
other communication which is specified in such request with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender, the Trustee shall mail to such
applicants, and file with the Securities and Exchange Commission, if permitted
or required by applicable law, together with a copy of the material to be
mailed, a written statement of the Company to the effect that such mailing would
be contrary to the best interests of the holders of all Debt Securities, as the
case may be, or would be in violation of applicable law. Such written statement
shall specify the basis of such opinion. If said Commission, as permitted or
required by applicable law, after opportunity for a hearing upon the objections
specified in the written statement so filed, shall enter an order refusing to
sustain any of such objections or if, after the entry of an order sustaining one
or more of such objections, said Commission shall find, after notice and
opportunity for hearing, that all the objections so sustained have been met and
shall enter an order so declaring, the Trustee shall mail copies of such
material to all such Securityholders with reasonable promptness after the entry
of such order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.

          (c) Each and every Securityholder, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any Paying Agent shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Securityholders in
accordance with the provisions of subsection (b) of this Section 4.02,
regardless of the source from which such information was derived, and that


                                      -27-



the Trustee shall not be held accountable by reason of mailing any material
pursuant to a request made under said subsection (b).

     SECTION 4.03. Financial and Other Information.

          The Company shall deliver to each Securityholder (1) each Report on
Form 10-K and Form 10-Q prepared by the Company and filed with the Securities
and Exchange Commission in accordance with the Exchange Act within 7 days after
the filing thereof, (2) if the Company is not then (y) subject to Section 13 or
15(d) of the Exchange Act or (z) exempt from reporting pursuant to Rule
12g3-2(b) thereunder, the Company shall be required to provide within 45 days of
the end of each calendar quarterly period and 90 days after the end of each
calendar year, the information required to be provided by Rule 144A(d)(4) under
the Securities Act and (3) within 30 days after the end of the fiscal year of
the Company, Form 1099 or such other annual U.S. federal income tax information
statement required by the Code containing such information with regard to the
Debt Securities held by such Securityholder as is required by the Code and the
income tax regulations of the U.S. Treasury thereunder.

          The Company will cause copies of its regulatory reports to be
delivered to the Securityholder promptly following their filing with the Federal
Reserve.

                                   ARTICLE V

      REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT

     SECTION 5.01. Events of Default.

          The following events shall be "Events of Default" with respect to Debt
Securities:

          (a) the Company defaults in the payment of any interest upon any Debt
Security when it becomes due and payable (unless the Company has elected and may
defer interest payments pursuant to Section 2.11), and continuance of such
default for a period of 30 days; for the avoidance of doubt, an extension of any
interest distribution period by the Company in accordance with Section 2.11 of
this Indenture shall not constitute a default under this clause 5.01(a); or

          (b) the Company defaults in the payment of all or any part of the
principal of (or premium, if any, on) any Debt Securities as and when the same
shall become due and payable either at maturity, upon redemption, by declaration
of acceleration pursuant to Section 5.01 of this Indenture or otherwise; or

          (c) the Company defaults in the payment of any interest upon any Debt
Security when it becomes due and payable following the nonpayment of any such
interest for 20 or more consecutive quarterly periods; or

          (d) the Company defaults in the performance of, or breaches, any of
its covenants or agreements in Sections 3.06, 3.07, 3.08 or 3.09 of this
Indenture (other than a covenant or agreement a default in whose performance or
whose breach is elsewhere in this


                                      -28-



Section specifically dealt with), and continuance of such default or breach for
a period of 30 days after there has been given, by registered or certified mail,
to the Company by the Trustee or to the Company and the Trustee by the holders
of not less than 25% in aggregate principal amount of the outstanding Debt
Securities, a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default" hereunder;
or

          (e) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appoints a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or for any substantial part of
its property, or orders the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 90
consecutive days; or

          (f) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or

          (g) the Trust shall have voluntarily or involuntarily liquidated,
dissolved, wound-up its business or otherwise terminated its existence except in
connection with (1) the distribution of the Debt Securities to holders of the
Trust Securities in liquidation of their interests in the Trust, (2) the
redemption of all of the outstanding Trust Securities or (3) certain mergers,
consolidations or amalgamations, each as permitted by the Declaration.

          If an Event of Default specified under clause (c) of this Section 5.01
occurs and is continuing with respect to the Debt Securities, then, and in each
and every such case, unless the principal of the Debt Securities shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Debt Securities then outstanding
hereunder, by notice in writing to the Company (and to the Trustee if given by
Securityholders), may declare the entire principal of the Debt Securities and
any premium and interest accrued, but unpaid, thereon, if any, to be due and
payable immediately, and upon any such declaration the same shall become
immediately due and payable. If an Event of Default specified under clause (e),
(f) or (g) of this Section 5.01 occurs, then, in each and every such case, the
entire principal amount of the Debt Securities and any premium and interest
accrued, but unpaid, thereon shall ipso facto become immediately due and payable
without further action. Notwithstanding anything to the contrary in this Section
5.01, if at any time during the period in which this Indenture remains in force
and effect, the Company ceases or elects to cease to be subject to the
supervision and regulations of the Federal Reserve, OTS, OCC or similar
regulatory authority overseeing bank, thrift, savings and loan or financial
holding companies or similar institutions requiring specifications for the
treatment of capital similar in nature to the capital adequacy guidelines under
the Federal Reserve rules and regulations, then the first sentence of this
paragraph shall be deemed to include clauses (a), (b) and (d) under this Section


                                     -29-



5.01 as an Event of Default resulting in an acceleration of payment of the Debt
Securities to the same extent as provided herein for clause (c).

          With respect to clause (d) of this Section 5.01, the Company agrees
that in the event of a breach by the Company of its covenants or agreements
mentioned therein, any remedy at law or in damages may prove inadequate and
therefore the Company agrees that the Trustee shall be entitled to injunctive
relief against the Company in the event of any breach or threatened breach by
the Company, in addition to any other relief (including damages) available to
the Trustee under this Indenture or under law.

          The foregoing provisions, however, are subject to the condition that
if, at any time after the principal of the Debt Securities shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, (i)
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
all matured installments of interest upon all the Debt Securities and all
payments on the Debt Securities which shall have become due otherwise than by
acceleration (with interest upon all such payments and Deferred Interest, to the
extent permitted by law) and such amount as shall be sufficient to cover
reasonable compensation to the Trustee and each predecessor Trustee, their
respective agents, attorneys and counsel, and all other amounts due to the
Trustee pursuant to Section 6.06, if any, and (ii) all Events of Default under
this Indenture, other than the non-payment of the payments on Debt Securities
which shall have become due by acceleration, shall have been cured, waived or
otherwise remedied as provided herein, and in each and every such case the
holders of a majority in aggregate principal amount of the Debt Securities then
outstanding, by written notice to the Company and to the Trustee, may waive all
defaults and rescind and annul such declaration and its consequences, but no
such waiver or rescission and annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereon; provided,
however, that if the Debt Securities are held by the Trust or a trustee of the
Trust, such waiver or rescission and annulment shall not be effective until the
holders of a majority in aggregate liquidation amount of the outstanding Capital
Securities of the Trust shall have consented to such waiver or rescission and
annulment.

          In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the Trustee and the Securityholders shall be restored respectively to
their several positions and rights hereunder, and all rights, remedies and
powers of the Company, the Trustee and the Securityholders shall continue as
though no such proceeding had been taken.

     SECTION 5.02. Payment of Debt Securities on Default; Suit Therefor.

          The Company covenants that upon the occurrence of an Event of Default
pursuant to paragraphs (c), (e), (f) or (g) of Section 5.01, and upon demand of
the Trustee, the Company will pay to the Trustee, for the benefit of the
Securityholders, the whole amount that then shall have become due and payable on
all Debt Securities including Deferred Interest accrued on the Debt Securities;
and, in addition thereto, such further amount as shall be sufficient to cover
the


                                      -30-



costs and expenses of collection, including a reasonable compensation to the
Trustee, its agents, attorneys and counsel, and any other amounts due to the
Trustee under Section 6.06. In case the Company shall fail forthwith to pay such
amounts upon such demand, the Trustee, in its own name and as trustee of an
express trust, shall be entitled and empowered to institute any actions or
proceedings at law or in equity for the collection of the sums so due and
unpaid, and may prosecute any such action or proceeding to judgment or final
decree, and may enforce any such judgment or final decree against the Company or
any other obligor on such Debt Securities and collect in the manner provided by
law out of the property of the Company or any other obligor on such Debt
Securities wherever situated the moneys adjudged or decreed to be payable.

          In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Debt Securities
under Bankruptcy Law, or in case a receiver or trustee shall have been appointed
for the property of the Company or such other obligor, or in the case of any
other similar judicial proceedings relative to the Company or other obligor upon
the Debt Securities, or to the creditors or property of the Company or such
other obligor, the Trustee, irrespective of whether the principal of the Debt
Securities shall then be due and payable as therein expressed or by declaration
of acceleration or otherwise and irrespective of whether the Trustee shall have
made any demand pursuant to the provisions of this Section 5.02, shall be
entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal and interest
owing and unpaid in respect of the Debt Securities and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee (including
any claim for reasonable compensation to the Trustee and each predecessor
Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all other amounts due to the Trustee under Section 6.06) and of
the Securityholders allowed in such judicial proceedings relative to the Company
or any other obligor on the Debt Securities, or to the creditors or property of
the Company or such other obligor, unless prohibited by applicable law and
regulations, to vote on behalf of the Securityholders in any election of a
trustee or a standby trustee in arrangement, reorganization, liquidation or
other bankruptcy or insolvency proceedings or Person performing similar
functions in comparable proceedings, and to collect and receive any moneys or
other property payable or deliverable on any such claims, and to distribute the
same after the deduction of its charges and expenses; and any receiver, assignee
or trustee in bankruptcy or reorganization is hereby authorized by each of the
Securityholders to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee such amounts as shall be sufficient to
cover reasonable compensation to the Trustee, each predecessor Trustee and their
respective agents, attorneys and counsel, and all other amounts due to the
Trustee under Section 6.06.

          Nothing herein contained shall be construed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting the
Debt Securities or the rights of any holder thereof or to authorize the Trustee
to vote in respect of the claim of any Securityholder in any such proceeding.

          All rights of action and of asserting claims under this Indenture, or
under any of the Debt Securities, may be enforced by the Trustee without the
possession of any of the Debt


                                      -31-



Securities, or the production thereof at any trial or other proceeding relative
thereto, and any such suit or proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall be for the ratable benefit of the Securityholders.

          In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the
Securityholders, and it shall not be necessary to make any Securityholders
parties to any such proceedings.

     SECTION 5.03. Application of Moneys Collected by Trustee.

          Any moneys collected by the Trustee shall be applied in the following
order, at the date or dates specified pursuant hereto for the distribution of
such moneys, upon presentation of the several Debt Securities in respect of
which moneys have been collected, and stamping thereon the payment, if only
partially paid, and upon surrender thereof if fully paid:

          First: To the payment of costs and expenses incurred by, and
reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all
other amounts due to the Trustee under Section 6.06;

          Second: To the payment of all Senior Indebtedness of the Company if
and to the extent required by Article XV;

          Third: To the payment of the amounts then due and unpaid upon Debt
Securities, in respect of which or for the benefit of which money has been
collected, ratably, without preference or priority of any kind, according to the
amounts due on such Debt Securities; and

          Fourth: The balance, if any, to the Company.

     SECTION 5.04. Proceedings by Securityholders.

          No Securityholder shall have any right to institute any suit, action
or proceeding for any remedy hereunder, unless such Securityholder previously
shall have given to the Trustee written notice of an Event of Default with
respect to the Debt Securities and unless the holders of not less than 25% in
aggregate principal amount of the Debt Securities then outstanding shall have
given the Trustee a written request to institute such action, suit or proceeding
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred thereby, and
the Trustee for 60 days after its receipt of such notice, request and offer of
indemnity shall have failed to institute any such action, suit or proceeding;
provided, that no Securityholder shall have any right to prejudice the rights of
any other Securityholder, obtain priority or preference over any other such
Securityholder or enforce any right under this Indenture except in the manner
herein provided and for the equal, ratable and common benefit of all
Securityholders.

          Notwithstanding any other provisions in this Indenture, however, the
right of any Securityholder to receive payment of the principal of, premium, if
any, and interest on such Debt Security when due, or to institute suit for the
enforcement of any such payment, shall not be


                                      -32-


impaired or affected without the consent of such Securityholder. For the
protection and enforcement of the provisions of this Section, each and every
Securityholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.

     SECTION 5.05. Proceedings by Trustee.

          In case of an Event of Default hereunder the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either by suit in
equity or by action at law or by proceeding in bankruptcy or otherwise, whether
for the specific enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this Indenture, or
to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.

     SECTION 5.06. Remedies Cumulative and Continuing.

          Except as otherwise provided in Section 2.06, all powers and remedies
given by this Article V to the Trustee or to the Securityholders shall, to the
extent permitted by law, be deemed cumulative and not exclusive of any other
powers and remedies available to the Trustee or the Securityholders, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture or otherwise established
with respect to the Debt Securities, and no delay or omission of the Trustee or
of any Securityholder to exercise any right or power accruing upon any Event of
Default occurring and continuing as aforesaid shall impair any such right or
power, or shall be construed to be a waiver of any such default or an
acquiescence therein; and, subject to the provisions of Section 5.04, every
power and remedy given by this Article V or by law to the Trustee or to the
Securityholders may be exercised from time to time, and as often as shall be
deemed expedient, by the Trustee or by the Securityholders.

     SECTION 5.07. Direction of Proceedings and Waiver of Defaults by Majority
of Securityholders.

          The holders of a majority in aggregate principal amount of the Debt
Securities affected (voting as one class) at the time outstanding and, if the
Debt Securities are held by the Trust or a trustee of the Trust, the holders of
a majority in aggregate liquidation amount of the outstanding Capital Securities
of the Trust shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee with respect to such Debt
Securities; provided, however, that if the Debt Securities are held by the Trust
or a trustee of the Trust, such time, method and place or such exercise, as the
case may be, may not be so directed until the holders of a majority in aggregate
liquidation amount of the outstanding Capital Securities of the Trust shall have
directed such time, method and place or such exercise, as the case may be;
provided, further, that (subject to the provisions of Section 6.01) the Trustee
shall have the right to decline to follow any such direction if the Trustee
being advised by counsel shall determine that the action so directed would be
unjustly prejudicial to the holders not taking part in such direction or if the
Trustee being advised by counsel determines that the action or proceeding so
directed may not lawfully be taken or if a Responsible Officer of the Trustee
shall determine that the action or


                                      -33-


proceedings so directed would involve the Trustee in personal liability. Prior
to any declaration of acceleration, or ipso facto acceleration, of the maturity
of the Debt Securities, the holders of a majority in aggregate principal amount
of the Debt Securities at the time outstanding may on behalf of the holders of
all of the Debt Securities waive (or modify any previously granted waiver of)
any past default or Event of Default and its consequences, except a default (a)
in the payment of principal of, premium, if any, or interest on any of the Debt
Securities, (b) in respect of covenants or provisions hereof which cannot be
modified or amended without the consent of the holder of each Debt Security
affected, or (c) in respect of the covenants contained in Section 3.09;
provided, however, that if the Debt Securities are held by the Trust or a
trustee of the Trust, such waiver or modification to such waiver shall not be
effective until the holders of a majority in Liquidation Amount of the Trust
Securities of the Trust shall have consented to such waiver or modification to
such waiver; provided, further, that if the consent of the holder of each
outstanding Debt Security is required, such waiver or modification to such
waiver shall not be effective until each holder of the outstanding Capital
Securities of the Trust shall have consented to such waiver or modification to
such waiver. Upon any such waiver or modification to such waiver, the Default or
Event of Default covered thereby shall be deemed to be cured for all purposes of
this Indenture and the Company, the Trustee and the Securityholders shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver or modification to such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon.
Whenever any Default or Event of Default hereunder shall have been waived as
permitted by this Section 5.07, said Default or Event of Default shall for all
purposes of the Debt Securities and this Indenture be deemed to have been cured
and to be not continuing.

     SECTION 5.08. Notice of Defaults.

          The Trustee shall, within 90 days after a Responsible Officer of the
Trustee shall have actual knowledge or received written notice of the occurrence
of a Default with respect to the Debt Securities, mail to all Securityholders,
as the names and addresses of such Securityholders appear upon the Debt Security
Register, notice of all Defaults with respect to the Debt Securities actually
known to the Trustee, unless such defaults shall have been cured before the
giving of such notice (the term "defaults" for the purpose of this Section 5.08
being hereby defined to be the events specified in subsections (a), (b), (c),
(d), (e), (f) and (g) of Section 5.01, not including periods of grace, if any,
provided for therein); provided, that, except in the case of default in the
payment of the principal of, premium, if any, or interest on any of the Debt
Securities, the Trustee shall be protected in withholding such notice if and so
long as a Responsible Officer of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Securityholders.

     SECTION 5.09. Undertaking to Pay Costs.

          All parties to this Indenture agree, and each Securityholder by such
Securityholder's acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees and expenses,


                                      -34-



against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.09 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding in the aggregate more than 10% in principal amount of
the Debt Securities (or, if such Debt Securities are held by the Trust or a
trustee of the Trust, more than 10% in liquidation amount of the outstanding
Capital Securities), to any suit instituted by any Securityholder for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Debt Security against the Company on or after the same shall have become
due and payable, or to any suit instituted in accordance with Section 14.12.

                                   ARTICLE VI

                             CONCERNING THE TRUSTEE

     SECTION 6.01. Duties and Responsibilities of Trustee.

          With respect to the holders of Debt Securities issued hereunder, the
Trustee, prior to the occurrence of an Event of Default with respect to the Debt
Securities and after the curing or waiving of all Events of Default which may
have occurred, with respect to the Debt Securities, undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture. In
case an Event of Default with respect to the Debt Securities has occurred (which
has not been cured or waived), the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.

          No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:

          (a) prior to the occurrence of an Event of Default with respect to the
Debt Securities and after the curing or waiving of all Events of Default which
may have occurred

               (1) the duties and obligations of the Trustee with respect to the
          Debt Securities shall be determined solely by the express provisions
          of this Indenture, and the Trustee shall not be liable except for the
          performance of such duties and obligations with respect to the Debt
          Securities as are specifically set forth in this Indenture, and no
          implied covenants or obligations shall be read into this Indenture
          against the Trustee; and

               (2) in the absence of bad faith on the part of the Trustee, the
          Trustee may conclusively rely, as to the truth of the statements and
          the correctness of the opinions expressed therein, upon any
          certificates or opinions furnished to the Trustee and conforming to
          the requirements of this Indenture; but, in the case of any such
          certificates or opinions which by any provision hereof are
          specifically required to be furnished to the Trustee, the Trustee
          shall be under a duty to


                                      -35-



          examine the same to determine whether or not they conform on their
          face to the requirements of this Indenture;

          (b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers of the Trustee, unless it shall
be proved that the Trustee was negligent in ascertaining the pertinent facts;

          (c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith, in accordance with the direction of
the Securityholders pursuant to Section 5.07, relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture;

          (d) the Trustee shall not be charged with knowledge of any Default or
Event of Default with respect to the Debt Securities unless either (1) a
Responsible Officer shall have actual knowledge of such Default or Event of
Default or (2) written notice of such Default or Event of Default shall have
been given to the Trustee by the Company or any other obligor on the Debt
Securities or by any Securityholder, except with respect to an Event of Default
pursuant to Sections 5.01(a), 5.01(b) or 5.01(c) hereof (other than an Event of
Default resulting from the default in the payment of Additional Interest or
premium, if any, if the Trustee does not have actual knowledge or written notice
that such payment is due and payable), of which the Trustee shall be deemed to
have knowledge; and

          (e) in the absence of bad faith on the part of the Trustee, the
Trustee may seek and rely on reasonable instructions from the Company.

          None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers.

     SECTION 6.02. Reliance on Documents, Opinions, etc.

          Except as otherwise provided in Section 6.01:

          (a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, note,
debenture or other paper or document believed by it in good faith to be genuine
and to have been signed or presented by the proper party or parties;

          (b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any Board
Resolution may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;

          (c) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel;


                                      -36-



          (d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby;

          (e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture; nothing
contained herein shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default with respect to the Debt Securities (that has
not been cured or waived) to exercise with respect to the Debt Securities such
of the rights and powers vested in it by this Indenture, and to use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of such person's own affairs;

          (f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
coupon or other paper or document, unless requested in writing to do so by the
holders of not less than a majority in aggregate principal amount of the
outstanding Debt Securities affected thereby; provided, however, that if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expense or liability as a condition to so
proceeding; and

          (g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents (including
any Authenticating Agent) or attorneys, and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed by it with due care.

     SECTION 6.03. No Responsibility for Recitals, etc.

          The recitals contained herein and in the Debt Securities (except in
the certificate of authentication of the Trustee or the Authenticating Agent)
shall be taken as the statements of the Company and the Trustee and the
Authenticating Agent assume no responsibility for the correctness of the same.
The Trustee and the Authenticating Agent make no representations as to the
validity or sufficiency of this Indenture or of the Debt Securities. The Trustee
and the Authenticating Agent shall not be accountable for the use or application
by the Company of any Debt Securities or the proceeds of any Debt Securities
authenticated and delivered by the Trustee or the Authenticating Agent in
conformity with the provisions of this Indenture.

     SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer Agents
or Registrar May Own Debt Securities.

          The Trustee or any Authenticating Agent or any Paying Agent or any
transfer agent or any Debt Security Registrar, in its individual or any other
capacity, may become the


                                      -37-



owner or pledgee of Debt Securities with the same rights it would have if it
were not Trustee, Authenticating Agent, Paying Agent, transfer agent or Debt
Security Registrar.

     SECTION 6.05. Moneys to be Held in Trust.

          Subject to the provisions of Section 12.04, all moneys received by the
Trustee or any Paying Agent shall, until used or applied as herein provided, be
held in trust for the purpose for which they were received, but need not be
segregated from other funds except to the extent required by law. The Trustee
and any Paying Agent shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.
So long as no Event of Default shall have occurred and be continuing, all
interest allowed on any such moneys, if any, shall be paid from time to time to
the Company upon the written order of the Company, signed by the Chairman of the
Board of Directors, the President, the Chief Operating Officer, a Vice
President, the Treasurer or an Assistant Treasurer of the Company.

     SECTION 6.06. Compensation and Expenses of Trustee.

          Other than as provided in the Fee Agreement of even date herewith
between Cohen & Company, the Trustee and the Company, the Company covenants and
agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, such compensation as shall be agreed to in writing between the
Company and the Trustee (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and the Company
will pay or reimburse the Trustee upon its written request for all documented
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the reasonable expenses and disbursements of its
counsel and of all Persons not regularly in its employ) except any such expense,
disbursement or advance that arises from its negligence, willful misconduct or
bad faith. The Company also covenants to indemnify each of the Trustee
(including in its individual capacity) and any predecessor Trustee (and its
officers, agents, directors and employees) for, and to hold it harmless against,
any and all loss, damage, claim, liability or expense including taxes (other
than taxes based on the income of the Trustee), except to the extent such loss,
damage, claim, liability or expense results from the negligence, willful
misconduct or bad faith of such indemnitee, arising out of or in connection with
the acceptance or administration of this Trust, including the costs and expenses
of defending itself against any claim or liability in the premises. The
obligations of the Company under this Section 6.06 to compensate and indemnify
the Trustee and to pay or reimburse the Trustee for documented expenses,
disbursements and advances shall constitute additional indebtedness hereunder.
Such additional indebtedness shall be secured by (and the Company hereby grants
and pledges to the Trustee) a lien prior to that of the Debt Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the benefit of the holders of particular Debt Securities.

          Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in subsections (e), (f) or (g) of
Section 5.01, the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to


                                      -38-



constitute expenses of administration under any applicable federal or state
bankruptcy, insolvency or other similar law.

          The provisions of this Section shall survive the resignation or
removal of the Trustee and the defeasance or other termination of this
Indenture.

          Notwithstanding anything in this Indenture or any Debt Security to the
contrary, the Trustee shall have no obligation whatsoever to advance funds to
pay any principal of or interest on or other amounts with respect to the Debt
Securities or otherwise advance funds to or on behalf of the Company.

     SECTION 6.07. Officers' Certificate as Evidence.

          Except as otherwise provided in Sections 6.01 and 6.02, whenever in
the administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence,
willful misconduct or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Trustee, and such certificate, in the absence of negligence, willful misconduct
or bad faith on the part of the Trustee, shall be full warrant to the Trustee
for any action taken or omitted by it under the provisions of this Indenture
upon the faith thereof.

     SECTION 6.08. Eligibility of Trustee.

          The Trustee hereunder shall at all times be a U.S. Person that is a
banking corporation or national banking association organized and doing business
under the laws of the United States of America or any state thereof or of the
District of Columbia and authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least fifty million U.S.
dollars ($50,000,000) and subject to supervision or examination by federal,
state, or District of Columbia authority. If such corporation or national
banking association publishes reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 6.08 the combined capital and
surplus of such corporation or national banking association shall be deemed to
be its combined capital and surplus as set forth in its most recent records of
condition so published.

          The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee, notwithstanding that such corporation or national banking association
shall be otherwise eligible and qualified under this Article.

          In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.08, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.09.


                                      -39-



          If the Trustee has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the Trust Indenture Act, the Trustee shall
either eliminate such interest or resign, to the extent and in the manner
provided by, and subject to this Indenture.

     SECTION 6.09. Resignation or Removal of Trustee, Calculation Agent, Paying
Agent or Debt Security Registrar.

          (a) The Trustee, or any trustee or trustees hereafter appointed, the
Calculation Agent, the Paying Agent and any Debt Security Registrar may at any
time resign by giving written notice of such resignation to the Company and by
mailing notice thereof, at the Company's expense, to the Securityholders at
their addresses as they shall appear on the Debt Security Register. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor or successors by written instrument, in duplicate, executed by order
of its Board of Directors, one copy of which instrument shall be delivered to
the resigning party and one copy to the successor. If no successor shall have
been so appointed and have accepted appointment within 30 days after the mailing
of such notice of resignation to the affected Securityholders, the resigning
party may petition any court of competent jurisdiction for the appointment of a
successor, or any Securityholder who has been a bona fide holder of a Debt
Security or Debt Securities for at least six months may, subject to the
provisions of Section 5.09, on behalf of himself or herself and all others
similarly situated, petition any such court for the appointment of a successor.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor.

          (b) In case at any time any of the following shall occur:

               (1) the Trustee shall fail to comply with the provisions of the
          last paragraph of Section 6.08 after written request therefor by the
          Company or by any Securityholder who has been a bona fide holder of a
          Debt Security or Debt Securities for at least six months,

               (2) the Trustee shall cease to be eligible in accordance with the
          provisions of Section 6.08 and shall fail to resign after written
          request therefor by the Company or by any such Securityholder, or

               (3) the Trustee shall become incapable of acting, or shall be
          adjudged bankrupt or insolvent, or a receiver of the Trustee or of its
          property shall be appointed, or any public officer shall take charge
          or control of the Trustee or of its property or affairs for the
          purpose of rehabilitation, conservation or liquidation,

     then, in any such case, the Company may remove the Trustee and appoint a
successor Trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor Trustee, or, subject to the
provisions of Section 5.09, if no successor Trustee shall have been so appointed
and have accepted appointment within 30 days of the occurrence of any of (1),
(2) or (3) above, any Securityholder who has been a bona fide holder of a Debt
Security or Debt Securities for at least six months may, on behalf of himself or
herself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the


                                      -40-



appointment of a successor Trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, remove the Trustee and appoint a
successor Trustee.

          (c) Upon prior written notice to the Company and the Trustee, the
holders of a majority in aggregate principal amount of the Debt Securities at
the time outstanding may at any time remove the Trustee and nominate a successor
Trustee, which shall be deemed appointed as successor Trustee unless within ten
Business Days after such nomination the Company objects thereto, in which case
or in the case of a failure by such Securityholders to nominate a successor
Trustee, the Trustee so removed or any Securityholder, upon the terms and
conditions and otherwise as in subsection (a) of this Section 6.09 provided, may
petition any court of competent jurisdiction for an appointment of a successor.

          (d) Any resignation or removal of the Trustee, the Calculation Agent,
the Paying Agent and any Debt Security Registrar and appointment of a successor
pursuant to any of the provisions of this Section 6.09 shall become effective
upon acceptance of appointment by the successor as provided in Section 6.10.

     SECTION 6.10. Acceptance by Successor.

          Any successor Trustee, Calculation Agent, Paying Agent or Debt
Security Registrar appointed as provided in Section 6.09 shall execute,
acknowledge and deliver to the Company and to its predecessor an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the retiring party shall become effective and such successor, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations with respect to the Debt Securities of its
predecessor hereunder, with like effect as if originally named herein; but,
nevertheless, on the written request of the Company or of the successor, the
party ceasing to act shall, upon payment of the amounts then due it pursuant to
the provisions of Section 6.06, execute and deliver an instrument transferring
to such successor all the rights and powers of the party so ceasing to act and
shall duly assign, transfer and deliver to such successor all property and money
held by such retiring party hereunder. Upon reasonable request of any such
successor, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor all such rights
and powers. Any party ceasing to act shall, nevertheless, retain a lien upon all
property or funds held or collected to secure any amounts then due it pursuant
to the provisions of Section 6.06.

          If a successor Trustee is appointed, the Company, the retiring Trustee
and the successor Trustee shall execute and deliver an indenture supplemental
hereto which shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Debt Securities as to which the predecessor
Trustee is not retiring shall continue to be vested in the predecessor Trustee,
and shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the Trust hereunder
by more than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the same
trust and that each such Trustee shall be Trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee.


                                      -41-



          No successor Trustee shall accept appointment as provided in this
Section 6.10 unless at the time of such acceptance such successor Trustee shall
be eligible and qualified under the provisions of Section 6.08.

          In no event shall a retiring Trustee, Calculation Agent, Paying Agent
or Debt Security Registrar be liable for the acts or omissions of any successor
hereunder.

          Upon acceptance of appointment by a successor Trustee, Calculation
Agent, Paying Agent or Debt Security Registrar as provided in this Section 6.10,
the Company shall mail notice of the succession to the Securityholders at their
addresses as they shall appear on the Debt Security Register. If the Company
fails to mail such notice within ten Business Days after the acceptance of
appointment by the successor, the successor shall cause such notice to be mailed
at the expense of the Company.

     SECTION 6.11. Succession by Merger, etc.

          Any Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any Person
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder without the execution
or filing of any paper or any further act on the part of any of the parties
hereto; provided, that such Person shall be otherwise eligible and qualified
under this Article.

          In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Debt Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee, and deliver such Debt
Securities so authenticated; and in case at that time any of the Debt Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Debt Securities either in the name of any predecessor hereunder or in the
name of the successor Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Debt Securities or in this
Indenture provided that the certificate of the Trustee shall have; provided,
however, that the right to adopt the certificate of authentication of any
predecessor Trustee or authenticate Debt Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.

     SECTION 6.12. Authenticating Agents.

          There may be one or more Authenticating Agents appointed by the
Trustee upon the request of the Company with power to act on its behalf and
subject to its direction in the authentication and delivery of Debt Securities
issued upon exchange or registration of transfer thereof as fully to all intents
and purposes as though any such Authenticating Agent had been expressly
authorized to authenticate and deliver Debt Securities; provided, that the
Trustee shall have no liability to the Company for any acts or omissions of the
Authenticating Agent with respect to the authentication and delivery of Debt
Securities. Any such Authenticating Agent shall at all times be a Person
organized and doing business under the laws of the United States or of any state
or territory thereof or of the District of Columbia authorized under such laws
to act as Authenticating Agent, having a combined capital and surplus of at
least $50,000,000 and


                                      -42-



being subject to supervision or examination by federal, state, territorial or
District of Columbia authority. If such Person publishes reports of condition at
least annually pursuant to law or the requirements of such authority, then for
the purposes of this Section 6.12 the combined capital and surplus of such
Person shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect herein specified in this Section.

          Any Person into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, consolidation or conversion to which any Authenticating Agent shall be a
party, or any Person succeeding to all or substantially all of the corporate
trust business of any Authenticating Agent, shall be the successor of such
Authenticating Agent hereunder, if such successor Person is otherwise eligible
under this Section 6.12 without the execution or filing of any paper or any
further act on the part of the parties hereto or such Authenticating Agent.

          Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent with respect to the Debt
Securities by giving written notice of termination to such Authenticating Agent
and to the Company. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any Authenticating Agent shall cease to be
eligible under this Section 6.12, the Trustee may, and upon the request of the
Company shall, promptly appoint a successor Authenticating Agent eligible under
this Section 6.12, shall give written notice of such appointment to the Company
and shall mail notice of such appointment to all Securityholders as the names
and addresses of such Securityholders appear on the Debt Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all rights, powers, duties and responsibilities with
respect to the Debt Securities of its predecessor hereunder, with like effect as
if originally named as Authenticating Agent herein.

          Other than as provided in the Fee Agreement of even date herewith
between Cohen & Company, the Company and the Trustee, the Company agrees to pay
to any Authenticating Agent from time to time reasonable compensation for its
services. Any Authenticating Agent shall have no responsibility or liability for
any action taken by it as such in accordance with the directions of the Trustee
and shall receive such reasonable indemnity as it may require against the costs,
expenses and liabilities incurred in furtherance of its duties under this
Section 6.12.

                                   ARTICLE VII

                         CONCERNING THE SECURITYHOLDERS

     SECTION 7.01. Action by Securityholders.

          Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Debt Securities or
aggregate Liquidation Amount of the Capital Securities may take any action
(including the making of any demand or


                                      -43-



request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action the holders of such
specified percentage have joined therein may be evidenced (a) by any instrument
or any number of instruments of similar tenor executed by such Securityholders
or holders of Capital Securities, as the case may be, in person or by agent or
proxy appointed in writing, or (b) by the record of such Securityholders voting
in favor thereof at any meeting of such Securityholders duly called and held in
accordance with the provisions of Article VIII or of such holders of Capital
Securities duly called and held in accordance with the provisions of the
Declaration, or (c) by a combination of such instrument or instruments and any
such record of such a meeting of such Securityholders or holders of Capital
Securities, as the case may be, or (d) by any other method the Trustee deems
satisfactory.

          If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action or
revocation of the same, the Company may, at its option, as evidenced by an
Officers' Certificate, fix in advance a record date for such Debt Securities for
the determination of Securityholders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation
of the same, but the Company shall have no obligation to do so. If such a record
date is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action or revocation of the same may be given before or after
the record date, but only the Securityholders of record at the close of business
on the record date shall be deemed to be Securityholders for the purposes of
determining whether holders of the requisite proportion of outstanding Debt
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation
of the same, and for that purpose the outstanding Debt Securities shall be
computed as of the record date; provided, however, that no such authorization,
agreement or consent by such Securityholders on the record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.

     SECTION 7.02. Proof of Execution by Securityholders.

          Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of
the execution of any instrument by a Securityholder or such Securityholder's
agent or proxy shall be sufficient if made in accordance with such reasonable
rules and regulations as may be prescribed by the Trustee or in such manner as
shall be satisfactory to the Trustee. The ownership of Debt Securities shall be
proved by the Debt Security Register or by a certificate of the Debt Security
Registrar. The Trustee may require such additional proof of any matter referred
to in this Section as it shall deem necessary.

          The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.06.

     SECTION 7.03. Who Are Deemed Absolute Owners.

          Prior to due presentment for registration of transfer of any Debt
Security, the Company, the Trustee, any Authenticating Agent, any Paying Agent,
any transfer agent and any Debt Security Registrar may deem the Person in whose
name such Debt Security shall be registered upon the Debt Security Register to
be, and may treat such Person as, the absolute


                                      -44-



owner of such Debt Security (whether or not such Debt Security shall be overdue)
for the purpose of receiving payment of or on account of the principal of,
premium, if any, and interest on such Debt Security and for all other purposes;
and neither the Company nor the Trustee nor any Authenticating Agent nor any
Paying Agent nor any transfer agent nor any Debt Security Registrar shall be
affected by any notice to the contrary. All such payments so made to any
Securityholder for the time being or upon such Securityholder's order shall be
valid, and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for moneys payable upon any such Debt Security.

     SECTION 7.04. Debt Securities Owned by Company Deemed Not Outstanding.

          In determining whether the holders of the requisite aggregate
principal amount of Debt Securities have concurred in any direction, consent or
waiver under this Indenture, Debt Securities which are owned by the Company or
any other obligor on the Debt Securities or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company (other than the Trust) or any other obligor on the Debt Securities shall
be disregarded and deemed not to be outstanding for the purpose of any such
determination; provided, that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, consent or waiver,
only Debt Securities which a Responsible Officer of the Trustee actually knows
are so owned shall be so disregarded. Debt Securities so owned which have been
pledged in good faith may be regarded as outstanding for the purposes of this
Section 7.04 if the pledgee shall establish to the satisfaction of the Trustee
the pledgee's right to vote such Debt Securities and that the pledgee is not the
Company or any such other obligor or Person directly or indirectly controlling
or controlled by or under direct or indirect common control with the Company or
any such other obligor. In the case of a dispute as to such right, any decision
by the Trustee taken upon the advice of counsel shall be full protection to the
Trustee.

     SECTION 7.05. Revocation of Consents; Future Securityholders Bound.

          At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 7.01, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Debt Securities specified in
this Indenture in connection with such action, any Securityholder (in cases
where no record date has been set pursuant to Section 7.01) or any holder as of
an applicable record date (in cases where a record date has been set pursuant to
Section 7.01) of a Debt Security (or any Debt Security issued in whole or in
part in exchange or substitution therefor) the serial number of which is shown
by the evidence to be included in the Debt Securities the holders of which have
consented to such action may, by filing written notice with the Trustee at the
Principal Office of the Trustee and upon proof of holding as provided in Section
7.02, revoke such action so far as concerns such Debt Security (or so far as
concerns the principal amount represented by any exchanged or substituted Debt
Security). Except as aforesaid any such action taken by the holder of any Debt
Security shall be conclusive and binding upon such Securityholder and upon all
future holders and owners of such Debt Security, and of any Debt Security issued
in exchange or substitution therefor or on registration of transfer thereof,
irrespective of whether or not any notation in regard thereto is made upon such
Debt Security or any Debt Security issued in exchange or substitution therefor.


                                      -45-



                                  ARTICLE VIII

                            SECURITYHOLDERS' MEETINGS

     SECTION 8.01. Purposes of Meetings.

          A meeting of Securityholders may be called at any time and from time
to time pursuant to the provisions of this Article VIII for any of the following
purposes:

          (a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to be
taken by Securityholders pursuant to any of the provisions of Article V;

          (b) to remove the Trustee and nominate a successor trustee pursuant to
the provisions of Article VI;

          (c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 9.02; or

          (d) to take any other action authorized to be taken by or on behalf of
the holders of any specified aggregate principal amount of such Debt Securities
under any other provision of this Indenture or under applicable law.

     SECTION 8.02. Call of Meetings by Trustee.

          The Trustee may at any time call a meeting of Securityholders to take
any action specified in Section 8.01, to be held at such time and at such place
in Chicago, Illinois as the Trustee shall determine. Notice of every meeting of
the Securityholders, setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be mailed
to Securityholders affected at their addresses as they shall appear on the Debt
Securities Register. Such notice shall be mailed not less than 20 nor more than
180 days prior to the date fixed for the meeting.

     SECTION 8.03. Call of Meetings by Company or Securityholders.

          In case at any time the Company pursuant to a Board Resolution, or the
holders of at least 10% in aggregate principal amount of the Debt Securities, as
the case may be, then outstanding, shall have requested the Trustee to call a
meeting of Securityholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or such Securityholders may determine the time and the
place in for such meeting and may call such meeting to take any action
authorized in Section 8.01, by mailing notice thereof as provided in Section
8.02.


                                      -46-



     SECTION 8.04. Qualifications for Voting.

          To be entitled to vote at any meeting of Securityholders a Person
shall be (a) a holder of one or more Debt Securities with respect to which the
meeting is being held or (b) a Person appointed by an instrument in writing as
proxy by a holder of one or more such Debt Securities. The only Persons who
shall be entitled to be present or to speak at any meeting of Securityholders
shall be the Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.

     SECTION 8.05. Regulations.

          Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Securityholders, in regard to proof of the holding of Debt Securities and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall deem appropriate.

          The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 8.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote at the meeting.

          Subject to the provisions of Section 7.04, at any meeting each
Securityholder with respect to which such meeting is being held or proxy
therefor shall be entitled to one vote for each $1,000 principal amount of Debt
Securities held or represented by such Securityholder; provided, however, that
no vote shall be cast or counted at any meeting in respect of any Debt Security
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Debt Securities held by such chairman or instruments in writing as
aforesaid duly designating such chairman as the Person to vote on behalf of
other Securityholders. Any meeting of Securityholders duly called pursuant to
the provisions of Section 8.02 or 8.03 may be adjourned from time to time by a
majority of those present, whether or not constituting a quorum, and the meeting
may be held as so adjourned without further notice.

     SECTION 8.06. Voting.

          The vote upon any resolution submitted to any meeting of
Securityholders with respect to which such meeting is being held shall be by
written ballots on which shall be subscribed the signatures of such
Securityholders or of their representatives by proxy and the serial number or
numbers of the Debt Securities held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
triplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the


                                      -47-


secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more Persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 8.02. The record shall show the serial numbers of the Debt
Securities voting in favor of or against any resolution. The record shall be
signed and verified by the affidavits of the permanent chairman and secretary of
the meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting. Any record so signed and verified
shall be conclusive evidence of the matters therein stated.

     SECTION 8.07. Quorum; Actions.

          The Persons entitled to vote a majority in outstanding principal
amount of the Debt Securities shall constitute a quorum for a meeting of
Securityholders; provided, however, that if any action is to be taken at such
meeting with respect to a consent, waiver, request, demand, notice,
authorization, direction or other action which may be given by the holders of
not less than a specified percentage in outstanding principal amount of the Debt
Securities, the Persons holding or representing such specified percentage in
outstanding principal amount of the Debt Securities will constitute a quorum. In
the absence of a quorum within 30 minutes of the time appointed for any such
meeting, the meeting shall, if convened at the request of Securityholders, be
dissolved. In any other case the meeting may be adjourned for a period of not
less than 10 days as determined by the permanent chairman of the meeting prior
to the adjournment of such meeting. In the absence of a quorum at any such
adjourned meeting, such adjourned meeting may be further adjourned for a period
of not less than 10 days as determined by the permanent chairman of the meeting
prior to the adjournment of such adjourned meeting. Notice of the reconvening of
any adjourned meeting shall be given as provided in Section 8.02, except that
such notice need be given only once not less than five days prior to the date on
which the meeting is scheduled to be reconvened. Notice of the reconvening of an
adjourned meeting shall state expressly the percentage, as provided above, of
the outstanding principal amount of the Debt Securities which shall constitute a
quorum.

          Except as limited by the proviso in the first paragraph of Section
9.02, any resolution presented to a meeting or adjourned meeting duly reconvened
at which a quorum is present as aforesaid may be adopted by the affirmative vote
of the holders of not less than a majority in outstanding principal amount of
the Debt Securities; provided, however, that, except as limited by the proviso
in the first paragraph of Section 9.02, any resolution with respect to any
consent, waiver, request, demand, notice, authorization, direction or other
action that this Indenture expressly provides may be given by the holders of not
less than a specified percentage in outstanding principal amount of the Debt
Securities may be adopted at a meeting or an adjourned meeting duly reconvened
and at which a quorum is present as aforesaid only by the affirmative vote of
the holders of not less than such specified percentage in outstanding principal
amount of the Debt Securities.

          Any resolution passed or decision taken at any meeting of
Securityholders duly held in accordance with this Section shall be binding on
all the Securityholders, whether or not present or represented at the meeting.


                                      -48-



     SECTION 8.08. Written Consent Without a Meeting.

          Whenever under this Indenture, Securityholders are required or
permitted to take any action by vote, such action may be taken without a meeting
on written consent, setting forth the action so taken, signed by the
Securityholders of all outstanding Debt Securities entitled to vote thereon. No
consent shall be effective to take the action referred to therein unless, within
sixty days of the earliest dated consent delivered in the manner required by
this paragraph to the Trustee, written consents signed by a sufficient number of
Securityholders to take action are delivered to the Trustee at its Principal
Office. Delivery made to the Trustee at its Principal Office, shall be by hand
or by certificated or registered mail, return receipt requested. Written consent
thus given by the Securityholders of such number of Debt Securities as is
required hereunder, shall have the same effect as a valid vote of
Securityholders of such number of Debt Securities.

                                   ARTICLE IX

                             SUPPLEMENTAL INDENTURES

     SECTION 9.01. Supplemental Indentures without Consent of Securityholders.

          The Company, when authorized by a Board Resolution, and the Trustee
may from time to time and at any time enter into an indenture or indentures
supplemental hereto, without the consent of the Securityholders, for one or more
of the following purposes:

          (a) to evidence the succession of another Person to the Company, or
successive successions, and the assumption by the successor Person of the
covenants, agreements and obligations of the Company, pursuant to Article XI
hereof;

          (b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the Securityholders as the
Board of Directors shall consider to be for the protection of such
Securityholders, and to make the occurrence, or the occurrence and continuance,
of a Default in any of such additional covenants, restrictions or conditions a
Default or an Event of Default permitting the enforcement of all or any of the
several remedies provided in this Indenture as herein set forth; provided,
however, that in respect of any such additional covenant, restriction or
condition such supplemental indenture may provide for a particular period of
grace after default (which period may be shorter or longer than that allowed in
the case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;

          (c) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make or amend such other provisions in regard to matters or
questions arising under this Indenture; provided, that any such action shall not
adversely affect the interests of the Securityholders;

          (d) to add to, delete from, or revise the terms of Debt Securities,
including, without limitation, any terms relating to the issuance, exchange,
registration or transfer of Debt Securities, including to provide for transfer
procedures and restrictions substantially similar to


                                      -49-



those applicable to the Capital Securities, as required by Section 2.05 (for
purposes of assuring that no registration of Debt Securities is required under
the Securities Act of 1933, as amended); provided, that any such action shall
not adversely affect the interests of the holders of the Debt Securities then
outstanding (it being understood, for purposes of this proviso, that transfer
restrictions on Debt Securities substantially similar to those applicable to
Capital Securities shall not be deemed to adversely affect the Securityholders);

          (e) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Debt Securities and to add
to or change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 6.10;

          (f) to make any change (other than as elsewhere provided in this
paragraph) that does not adversely affect the rights of any Securityholder in
any material respect; or

          (g) to provide for the issuance of and establish the form and terms
and conditions of the Debt Securities, to establish the form of any
certifications required to be furnished pursuant to the terms of this Indenture
or the Debt Securities, or to add to the rights of the Securityholders.

          The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

          Any supplemental indenture authorized by the provisions of this
Section 9.01 may be executed by the Company and the Trustee without the consent
of the Securityholders at the time outstanding, notwithstanding any of the
provisions of Section 9.02.

     SECTION 9.02. Supplemental Indentures with Consent of Securityholders.

          With the consent (evidenced as provided in Section 7.01) of the
holders of not less than a majority in aggregate principal amount of the Debt
Securities at the time outstanding affected by such supplemental indenture, the
Company, when authorized by a Board Resolution, and the Trustee may from time to
time and at any time enter into an indenture or indentures supplemental hereto
(which shall conform to the provisions of the Trust Indenture Act, then in
effect, applicable to indentures qualified thereunder) for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Indenture or of any supplemental indenture or of modifying in any manner
the rights of the Securityholders; provided, however, that no such supplemental
indenture shall without such consent of the holders of each Debt Security then
outstanding and affected thereby (i) change the Maturity Date of any Debt
Security, or reduce the principal amount thereof or any premium thereon, or
reduce the rate (or manner of calculation of the rate) or extend the time of
payment of interest thereon, or reduce (other than as a result of the maturity
or earlier redemption of any such Debt Security in accordance with the terms of
this Indenture and such Debt Security) or increase the aggregate


                                      -50-



principal amount of Debt Securities then outstanding, or change any of the
redemption provisions, or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than United States Dollars, or
impair or affect the right of any Securityholder to institute suit for payment
thereof or impair the right of repayment, if any, at the option of the
Securityholder, or (ii) reduce the aforesaid percentage of Debt Securities the
holders of which are required to consent to any such supplemental indenture; and
provided, further, that if the Debt Securities are held by the Trust or a
trustee of such trust, such supplemental indenture shall not be effective until
the holders of a majority in Liquidation Amount of the outstanding Capital
Securities shall have consented to such supplemental indenture; provided,
further, that if the consent of the Securityholder of each outstanding Debt
Security is required, such supplemental indenture shall not be effective until
each holder of the outstanding Capital Securities shall have consented to such
supplemental indenture.

          Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Securityholders (and
holders of Capital Securities, if required) as aforesaid, the Trustee shall join
with the Company in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.

          Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, prepared by the
Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders as their names and addresses appear upon the
Debt Security Register. Any failure of the Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.

          It shall not be necessary for the consent of the Securityholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

     SECTION 9.03. Effect of Supplemental Indentures.

          Upon the execution of any supplemental indenture pursuant to the
provisions of this Article IX, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the Securityholders shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.

     SECTION 9.04. Notation on Debt Securities.

          Debt Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article IX may bear a
notation as to


                                      -51-



any matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Debt Securities so modified as to conform, in
the opinion of the Board of Directors of the Company, to any modification of
this Indenture contained in any such supplemental indenture may be prepared and
executed by the Company, authenticated by the Trustee or the Authenticating
Agent and delivered in exchange for the Debt Securities then outstanding.

     SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be
furnished to Trustee.

          The Trustee, subject to the provisions of Sections 6.01 and 6.02,
shall, in addition to the documents required by Section 14.06, receive an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements
of this Article IX. The Trustee shall receive an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant to this
Article IX is authorized or permitted by, and conforms to, the terms of this
Article IX and that it is proper for the Trustee under the provisions of this
Article IX to join in the execution thereof.

                                    ARTICLE X

                            REDEMPTION OF SECURITIES

     SECTION 10.01. Optional Redemption.

          At any time the Company shall have the right, subject to the receipt
by the Company of prior approval from any regulatory authority with jurisdiction
over the Company if such approval is then required under applicable capital
guidelines or policies of such regulatory authority, to redeem the Debt
Securities, in whole or (provided that all accrued and unpaid interest has been
paid on all Debt Securities for all Interest Payment Periods terminating on or
prior to such date) from time to time in part, on any March 15, June 15,
September 15 or December 15 on or after March 15, 2012 (the "Redemption Date"),
at the Redemption Price.

     SECTION 10.02. Special Event Redemption.

          If a Special Event shall occur and be continuing, the Company shall
have the right, subject to the receipt by the Company of prior approval from any
regulatory authority with jurisdiction over the Company if such approval is then
required under applicable capital guidelines or policies of such regulatory
authority, to redeem the Debt Securities, in whole or in part, at any time
within 90 days following the occurrence of such Special Event (the "Special
Redemption Date"), at the Special Redemption Price.

     SECTION 10.03. Notice of Redemption; Selection of Debt Securities.

          In case the Company shall desire to exercise the right to redeem all,
or, as the case may be, any part of the Debt Securities, it shall fix a date for
redemption and shall mail, or cause the Trustee to mail (at the expense of the
Company) a notice of such redemption at least 30 and not more than 60 days prior
to the date fixed for redemption to the Securityholders so to be redeemed as a
whole or in part at their last addresses as the same appear on the Debt Security


                                      -52-



Register. Such mailing shall be by first class mail. The notice if mailed in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the Securityholder receives such notice. In any case, failure to
give such notice by mail or any defect in the notice to the holder of any Debt
Security designated for redemption as a whole or in part shall not affect the
validity of the proceedings for the redemption of any other Debt Security.

          Each such notice of redemption shall specify the CUSIP number, if any,
of the Debt Securities to be redeemed, the date fixed for redemption, the
redemption price (or manner of calculation of the price) at which Debt
Securities are to be redeemed, the place or places of payment, that payment will
be made upon presentation and surrender of such Debt Securities, that interest
accrued to the date fixed for redemption will be paid as specified in said
notice, and that on and after said date interest thereon or on the portions
thereof to be redeemed will cease to accrue. If less than all the Debt
Securities are to be redeemed the notice of redemption shall specify the numbers
of the Debt Securities to be redeemed. In case the Debt Securities are to be
redeemed in part only, the notice of redemption shall state the portion of the
principal amount thereof to be redeemed and shall state that on and after the
date fixed for redemption, upon surrender of such Debt Security, a new Debt
Security or Debt Securities in principal amount equal to the unredeemed portion
thereof will be issued.

          On the Business Day prior to the Redemption Date or the Special
Redemption Date specified in the notice of redemption given as provided in this
Section, the Company will deposit with the Trustee or with one or more Paying
Agents an amount of money sufficient to redeem on the redemption date all the
Debt Securities so called for redemption at the appropriate redemption price,
together with unpaid interest accrued to such date.

          The Company will give the Trustee notice not less than 45 nor more
than 60 days prior to the Redemption Date as to the Redemption Price at which
the Debt Securities are to be redeemed and the aggregate principal amount of
Debt Securities to be redeemed and the Trustee shall select, in such manner as
in its sole discretion it shall deem appropriate and fair, the Debt Securities
or portions thereof (in integral multiples of $1,000) to be redeemed.

     SECTION 10.04. Payment of Debt Securities Called for Redemption.

          If notice of redemption has been given as provided in Section 10.03,
the Debt Securities or portions of Debt Securities with respect to which such
notice has been given shall become due and payable on the Redemption Date or the
Special Redemption Date (as the case may be) and at the place or places stated
in such notice at the applicable redemption price, together with interest
accrued to the date fixed for redemption, and on and after said Redemption Date
or the Special Redemption Date (unless the Company shall default in the payment
of such Debt Securities at the redemption price, together with unpaid interest
accrued thereon to said date) interest on the Debt Securities or portions of
Debt Securities so called for redemption shall cease to accrue. On presentation
and surrender of such Debt Securities at a place of payment specified in said
notice, such Debt Securities or the specified portions thereof shall be paid and
redeemed by the Company at the applicable redemption price, together with unpaid
interest accrued thereon to the Redemption Date or the Special Redemption Date
(as the case may be).


                                      -53-



          Upon presentation of any Debt Security redeemed in part only, the
Company shall execute and the Trustee shall authenticate and make available for
delivery to the holder thereof, at the expense of the Company, a new Debt
Security or Debt Securities of authorized denominations in principal amount
equal to the unredeemed portion of the Debt Security so presented.

                                   ARTICLE XI

                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

     SECTION 11.01. Company May Consolidate, etc., on Certain Terms.

          Nothing contained in this Indenture or in the Debt Securities shall
prevent any consolidation or merger of the Company with or into any other
corporation or corporations (whether or not affiliated with the Company) or
successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale, conveyance,
transfer or other disposition of all or substantially all of the property or
capital stock of the Company or its successor or successors to any other
corporation (whether or not affiliated with the Company, or its successor or
successors) authorized to acquire and operate the same; provided, however, that
the Company hereby covenants and agrees that, (i) upon any such consolidation,
merger (where the Company is not the surviving corporation), sale, conveyance,
transfer or other disposition, the successor entity shall be a corporation
organized and existing under the laws of the United States or any state thereof
or the District of Columbia (unless such corporation has (1) agreed to make all
payments due in respect of the Debt Securities or, if outstanding, the Capital
Securities and Capital Securities Guarantee without withholding or deduction
for, or on account of, any taxes, duties, assessments or other governmental
charges under the laws or regulations of the jurisdiction of organization or
residence (for tax purposes) of such corporation or any political subdivision or
taxing authority thereof or therein unless required by applicable law, in which
case such corporation shall have agreed to pay such additional amounts as shall
be required so that the net amounts received and retained by the Securityholders
or holders of Capital Securities, as the case may be, after payment of all taxes
(including withholding taxes), duties, assessments or other governmental
charges, will be equal to the amounts that such Securityholders or holders of
Capital Securities would have received and retained had no such taxes (including
withholding taxes), duties, assessments or other governmental charges been
imposed, (2) irrevocably and unconditionally consented and submitted to the
jurisdiction of any United States federal court or New York state court, in each
case located in The City of New York, Borough of Manhattan, in respect of any
action, suit or proceeding against it arising out of or in connection with this
Indenture, the Debt Securities, the Capital Securities Guarantee or the
Declaration and irrevocably and unconditionally waived, to the fullest extent
permitted by law, any objection to the laying of venue in any such court or that
any such action, suit or proceeding has been brought in an inconvenient forum
and (3) irrevocably appointed an agent in The City of New York for service of
process in any action, suit or proceeding referred to in clause (2) above) and
such corporation expressly assumes all of the obligations of the Company under
the Debt Securities, this Indenture, the Capital Securities Guarantee and the
Declaration and (ii) after giving effect to any such consolidation, merger,
sale, conveyance, transfer or other disposition, no Default or Event of Default
shall have occurred and be continuing.


                                      -54-



     SECTION 11.02. Successor Entity to be Substituted.

          In case of any such consolidation, merger, sale, conveyance, transfer
or other disposition contemplated in Section 11.01 and upon the assumption by
the successor entity, by supplemental indenture, executed and delivered to the
Trustee and reasonably satisfactory in form to the Trustee, of the due and
punctual payment of the principal of and premium, if any, and interest on all of
the Debt Securities and the due and punctual performance and observance of all
of the covenants and conditions of this Indenture to be performed or observed by
the Company, such successor entity shall succeed to and be substituted for the
Company, with the same effect as if it had been named herein as the Company, and
thereupon the predecessor entity shall be relieved of any further liability or
obligation hereunder or upon the Debt Securities. Such successor entity
thereupon may cause to be signed, and may issue either in its own name or in the
name of the Company, any or all of the Debt Securities issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee or the Authenticating Agent; and, upon the order of such successor
entity instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee or the Authenticating
Agent shall authenticate and deliver any Debt Securities which previously shall
have been signed and delivered by the officers of the Company, to the Trustee or
the Authenticating Agent for authentication, and any Debt Securities which such
successor entity thereafter shall cause to be signed and delivered to the
Trustee or the Authenticating Agent for that purpose. All the Debt Securities so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Debt Securities theretofore or thereafter issued in accordance
with the terms of this Indenture as though all of such Debt Securities had been
issued at the date of the execution hereof.

     SECTION 11.03. Opinion of Counsel to be Given to Trustee.

          The Trustee, subject to the provisions of Sections 6.01 and 6.02,
shall receive, in addition to the Opinion of Counsel required by Section 9.05,
an Opinion of Counsel as conclusive evidence that any consolidation, merger,
sale, conveyance, transfer or other disposition, and any assumption, permitted
or required by the terms of this Article XI complies with the provisions of this
Article XI.

                                   ARTICLE XII

                     SATISFACTION AND DISCHARGE OF INDENTURE

     SECTION 12.01. Discharge of Indenture.

          When (a) the Company shall deliver to the Trustee for cancellation all
Debt Securities theretofore authenticated (other than any Debt Securities which
shall have been destroyed, lost or stolen and which shall have been replaced or
paid as provided in Section 2.06) and not theretofore canceled, or (b) all the
Debt Securities not theretofore canceled or delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit with the Trustee, in trust, funds,
which shall be immediately due and payable,


                                      -55-



sufficient to pay at maturity or upon redemption all of the Debt Securities
(other than any Debt Securities which shall have been destroyed, lost or stolen
and which shall have been replaced or paid as provided in Section 2.06) not
theretofore canceled or delivered to the Trustee for cancellation, including
principal and premium, if any, and interest due or to become due to such date of
maturity or redemption date, as the case may be, but excluding, however, the
amount of any moneys for the payment of principal of, and premium, if any, or
interest on the Debt Securities (1) theretofore repaid to the Company in
accordance with the provisions of Section 12.04, or (2) paid to any state or to
the District of Columbia pursuant to its unclaimed property or similar laws, and
if in the case of either clause (a) or clause (b) the Company shall also pay or
cause to be paid all other sums payable hereunder by the Company, then this
Indenture shall cease to be of further effect except for the provisions of
Sections 2.05, 2.06, 3.01, 3.02, 3.04, 6.06, 6.09 and 12.04 hereof, which shall
survive until such Debt Securities shall mature or are redeemed, as the case may
be, and are paid in full. Thereafter, Sections 6.06, 6.09 and 12.04 shall
survive, and the Trustee, on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with, and at the cost and expense of the Company,
shall execute proper instruments acknowledging satisfaction of and discharging
this Indenture, the Company, however, hereby agreeing to reimburse the Trustee
for any costs or expenses thereafter reasonably and properly incurred by the
Trustee in connection with this Indenture or the Debt Securities.

     SECTION 12.02. Deposited Moneys to be Held in Trust by Trustee.

          Subject to the provisions of Section 12.04, all moneys deposited with
the Trustee pursuant to Section 12.01 shall be held in trust and applied by it
to the payment, either directly or through any Paying Agent (including the
Company if acting as its own Paying Agent), to the holders of the particular
Debt Securities for the payment of which such moneys have been deposited with
the Trustee, of all sums due and to become due thereon for principal, and
premium, if any, and interest.

     SECTION 12.03. Paying Agent to Repay Moneys Held.

          Upon the satisfaction and discharge of this Indenture, all moneys then
held by any Paying Agent of the Debt Securities (other than the Trustee) shall,
upon demand of the Company, be repaid to the Company or paid to the Trustee, and
thereupon such Paying Agent shall be released from all further liability with
respect to such moneys.

     SECTION 12.04. Return of Unclaimed Moneys.

          Any moneys deposited with or paid to the Trustee or any Paying Agent
for payment of the principal of, and premium, if any, or interest on Debt
Securities and not applied but remaining unclaimed by the Securityholders for
two years after the date upon which the principal of, and premium, if any, or
interest on such Debt Securities, as the case may be, shall have become due and
payable, shall be repaid to the Company by the Trustee or such Paying Agent on
written demand; and the holder of any of the Debt Securities shall thereafter
look only to the Company for any payment which such Securityholder may be
entitled to collect and all liability of the Trustee or such Paying Agent with
respect to such moneys shall thereupon cease.


                                      -56-



                                  ARTICLE XIII

         IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

     SECTION 13.01. Indenture and Debt Securities Solely Corporate Obligations.

          No recourse for the payment of the principal of or premium, if any, or
interest on any Debt Security, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in this Indenture or in any supplemental indenture, or
in any such Debt Security, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
officer, director, employee or agent, as such, past, present or future, of the
Company or of any predecessor or successor corporation of the Company, either
directly or through the Company or any successor corporation of the Company,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Debt Securities.

                                   ARTICLE XIV

                            MISCELLANEOUS PROVISIONS

     SECTION 14.01. Successors.

          All the covenants, stipulations, promises and agreements of the
Company contained in this Indenture shall bind its successors and assigns
whether so expressed or not.

     SECTION 14.02. Official Acts by Successor Entity.

          Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee, officer or other authorized Person of any entity that
shall at the time be the lawful successor of the Company.

     SECTION 14.03. Surrender of Company Powers.

          The Company by instrument in writing executed by authority of 2/3
(two-thirds) of its Board of Directors and delivered to the Trustee may
surrender any of the powers reserved to the Company and thereupon such power so
surrendered shall terminate both as to the Company and as to any permitted
successor.

     SECTION 14.04. Addresses for Notices, etc.

          Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the
Securityholders on the Company may be given or served in writing, duly signed by
the party giving such notice, and shall be delivered by facsimile (which shall
be followed by notice delivered or mailed by first class mail) or mailed by
first class mail to the Company at:


                                      -57-



                             Independent Bank Corp.
                                288 Union Street
                          Rockland, Massachusetts 02370
                             Attention: George Lamb

          Any notice, direction, request or demand by any Securityholder or the
Company to or upon the Trustee shall be deemed to have been sufficiently given
or made, for all purposes, if given or made in writing at the office of LaSalle
Bank National Association at:

                      135 South LaSalle Street, Suite 1511
                             Chicago, Illinois 60603
          Attn: CDO Trust Services Group - Independent Capital Trust V

     SECTION 14.05. Governing Law.

          This Indenture and the Debt Securities shall each be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to conflict of laws principles of said State other than Section 5-1401 of the
New York General Obligations Law.

     SECTION 14.06. Evidence of Compliance with Conditions Precedent.

          Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that in the opinion of
the signers all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with (except that no such Opinion of Counsel is
required to be furnished to the Trustee in connection with the authentication
and issuance of Debt Securities issued on the date of this Indenture).

          Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture (except certificates delivered pursuant to
Section 3.05) shall include (a) a statement that the person making such
certificate or opinion has read such covenant or condition and the definitions
relating thereto; (b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; (c) a statement that, in the opinion of
such person, he or she has made such examination or investigation as is
necessary to enable him or her to express an informed opinion as to whether or
not such covenant or condition has been complied with; and (d) a statement as to
whether or not, in the opinion of such person, such condition or covenant has
been complied with.

     SECTION 14.07. Non-Business Days.

          Notwithstanding anything to the contrary contained herein, if any
Interest Payment Date, other than on the Maturity Date, any Redemption Date or
the Special Redemption Date, falls on a day that is not a Business Day, then any
interest payable will be paid on, and such Interest Payment Date will be moved
to, the next succeeding Business Day, and additional interest will accrue for
each day that such payment is delayed as a result thereof. If the Maturity


                                      -58-



Date, Redemption Date or Special Redemption Date falls on a day that is not a
Business Day, then the principal, premium, if any, and/or interest payable on
such date will be paid on the next succeeding Business Day, and no additional
interest will accrue (except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day).

     SECTION 14.08. Table of Contents, Headings, etc.

          The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.

     SECTION 14.09. Execution in Counterparts.

          This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.

     SECTION 14.10. Severability.

          In case any one or more of the provisions contained in this Indenture
or in the Debt Securities shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of such Debt
Securities, but this Indenture and such Debt Securities shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.

     SECTION 14.11. Assignment.

          Subject to Article XI, the Company will have the right at all times to
assign any of its rights or obligations under this Indenture and the Debt
Securities to a direct or indirect wholly owned Subsidiary of the Company;
provided, however, that, in the event of any such assignment, the Company will
remain liable for all such obligations. Subject to the foregoing, this Indenture
is binding upon and inures to the benefit of the parties hereto and their
respective successors and assigns. This Indenture may not otherwise be assigned
by the parties thereto.

     SECTION 14.12. Acknowledgment of Rights.

          The Company acknowledges that, with respect to any Debt Securities
held by the Trust or the Institutional Trustee of the Trust, if the
Institutional Trustee of the Trust fails to enforce its rights under this
Indenture as the Securityholder held as the assets of the Trust after the
holders of a majority in Liquidation Amount of the Capital Securities of the
Trust have so directed in writing such Institutional Trustee, a holder of record
of such Capital Securities may to the fullest extent permitted by law institute
legal proceedings directly against the Company to enforce such Institutional
Trustee's rights under this Indenture without first instituting any legal
proceedings against such Institutional Trustee or any other Person.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
interest (or premium, if any) or principal on the Debt


                                      -59-



Securities on the date such interest (or premium, if any) or principal is
otherwise due and payable (or in the case of redemption, on the redemption
date), the Company acknowledges that a holder of record of Capital Securities of
the Trust may directly institute a proceeding against the Company for
enforcement of payment to such holder directly of the principal of (or premium,
if any) or interest on the Debt Securities having an aggregate principal amount
equal to the aggregate Liquidation Amount of the Capital Securities of such
holder on or after the respective due date specified in the Debt Securities.

                                   ARTICLE XV

                        SUBORDINATION OF DEBT SECURITIES

     SECTION 15.01. Agreement to Subordinate.

          The Company covenants and agrees, and each holder of Debt Securities
issued hereunder and under any supplemental indenture (the "Additional
Provisions") by such Securityholder's acceptance thereof likewise covenants and
agrees, that all Debt Securities shall be issued subject to the provisions of
this Article XV; and each Securityholder, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by such
provisions.

          The payment by the Company of the payments due on all Debt Securities
issued hereunder and under any Additional Provisions shall, to the extent and in
the manner hereinafter set forth, be subordinated and junior in right of payment
to the prior payment in full of all Senior Indebtedness of the Company, whether
outstanding at the date of this Indenture or thereafter incurred.

          No provision of this Article XV shall prevent the occurrence of any
Default or Event of Default hereunder.

     SECTION 15.02. Default on Senior Indebtedness.

          In the event and during the continuation of any default by the Company
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness of the Company following any applicable grace period, or in
the event that the maturity of any Senior Indebtedness of the Company has been
accelerated because of a default, and such acceleration has not been rescinded
or canceled and such Senior Indebtedness has not been paid in full, then, in
either case, no payment shall be made by the Company with respect to the
payments due on the Debt Securities.

          In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 15.02, such payment shall, subject to Section 15.06,
be held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior Indebtedness or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, but
only to the extent that the holders of the Senior Indebtedness (or their
representative or representatives or a trustee) notify the Trustee in writing
within 90 days of such payment of the amounts then due and owing on the


                                      -60-



Senior Indebtedness and only the amounts specified in such notice to the Trustee
shall be paid to the holders of Senior Indebtedness.

     SECTION 15.03. Liquidation; Dissolution; Bankruptcy.

          Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all Senior Indebtedness
of the Company shall first be paid in full, or payment thereof provided for in
money in accordance with its terms, before any payment is made by the Company on
the Debt Securities; and upon any such dissolution or winding-up or liquidation
or reorganization, any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Securityholders or the Trustee would be entitled to receive from the
Company, except for the provisions of this Article XV, shall be paid by the
Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, or by the Securityholders
or by the Trustee under this Indenture if received by them or it, directly to
the holders of Senior Indebtedness of the Company (pro rata to such holders on
the basis of the respective amounts of Senior Indebtedness held by such holders,
as calculated by the Company) or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay such Senior Indebtedness in
full, in money or money's worth, after giving effect to any concurrent payment
or distribution to or for the holders of such Senior Indebtedness, before any
payment or distribution is made to the Securityholders.

          In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Company, for application to the payment of all Senior Indebtedness of the
Company remaining unpaid to the extent necessary to pay such Senior Indebtedness
in full in money in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the benefit of the holders of such
Senior Indebtedness.

          For purposes of this Article XV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XV with respect
to the Debt Securities to the payment of all Senior Indebtedness of the Company,
that may at the time be outstanding, provided, that (a) such Senior Indebtedness
is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (b) the rights of the holders of such Senior
Indebtedness are not, without the consent of such


                                      -61-



holders, altered by such reorganization or readjustment. The consolidation of
the Company with, or the merger of the Company into, another corporation or the
liquidation or dissolution of the Company following the conveyance, transfer or
other disposition of its property as an entirety, or substantially as an
entirety, to another corporation upon the terms and conditions provided for in
Article XI of this Indenture shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 15.03 if such
other corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article XI of this Indenture.
Nothing in Section 15.02 or in this Section 15.03 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 6.06 of this Indenture.

     SECTION 15.04. Subrogation.

          Subject to the payment in full of all Senior Indebtedness of the
Company, the Securityholders shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of cash, property
or securities of the Company applicable to such Senior Indebtedness until all
payments due on the Debt Securities shall be paid in full; and, for the purposes
of such subrogation, no payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the Securityholders or
the Trustee would be entitled except for the provisions of this Article XV, and
no payment over pursuant to the provisions of this Article XV to or for the
benefit of the holders of such Senior Indebtedness by Securityholders or the
Trustee, shall, as between the Company, its creditors other than holders of
Senior Indebtedness of the Company, and the Securityholders be deemed to be a
payment or distribution by the Company to or on account of such Senior
Indebtedness. It is understood that the provisions of this Article XV are and
are intended solely for the purposes of defining the relative rights of the
Securityholders, on the one hand, and the holders of such Senior Indebtedness,
on the other hand.

          Nothing contained in this Article XV or elsewhere in this Indenture,
any Additional Provisions or in the Debt Securities is intended to or shall
impair, as between the Company, its creditors other than the holders of Senior
Indebtedness of the Company, and the Securityholders, the obligation of the
Company, which is absolute and unconditional, to pay to the Securityholders all
payments on the Debt Securities as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the Securityholders and creditors of the Company, other than
the holders of Senior Indebtedness of the Company, nor shall anything herein or
therein prevent the Trustee or the holder of any Debt Security from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article XV of the holders
of such Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.

          Upon any payment or distribution of assets of the Company referred to
in this Article XV, the Trustee, subject to the provisions of Article VI of this
Indenture, and the Securityholders shall be entitled to conclusively rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Securityholders, for the purposes of ascertaining the Persons
entitled to participate in such


                                      -62-



distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article XV.

     SECTION 15.05. Trustee to Effectuate Subordination.

          Each Securityholder by such Securityholder's acceptance thereof
authorizes and directs the Trustee on such Securityholder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article XV and appoints the Trustee such Securityholder's
attorney-in-fact for any and all such purposes.

     SECTION 15.06. Notice by the Company.

          The Company shall give prompt written notice to a Responsible Officer
of the Trustee at the Principal Office of the Trustee of any fact known to the
Company that would prohibit the making of any payment of moneys to or by the
Trustee in respect of the Debt Securities pursuant to the provisions of this
Article XV. Notwithstanding the provisions of this Article XV or any other
provision of this Indenture or any Additional Provisions, the Trustee shall not
be charged with knowledge of the existence of any facts that would prohibit the
making of any payment of moneys to or by the Trustee in respect of the Debt
Securities pursuant to the provisions of this Article XV, unless and until a
Responsible Officer of the Trustee at the Principal Office of the Trustee shall
have received written notice thereof from the Company or a holder or holders of
Senior Indebtedness or from any trustee therefor; and before the receipt of any
such written notice, the Trustee, subject to the provisions of Article VI of
this Indenture, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received the notice
provided for in this Section 15.06 at least two Business Days prior to the date
upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (or premium, if
any) or interest on any Debt Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.

          The Trustee, subject to the provisions of Article VI of this
Indenture, shall be entitled to conclusively rely on the delivery to it of a
written notice by a Person representing himself or herself to be a holder of
Senior Indebtedness of the Company (or a trustee or representative on behalf of
such holder) to establish that such notice has been given by a holder of such
Senior Indebtedness or a trustee or representative on behalf of any such holder
or holders. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of such
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article XV, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article XV, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.


                                      -63-



     SECTION 15.07. Rights of the Trustee, Holders of Senior Indebtedness.

          The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XV in respect of any Senior Indebtedness at any
time held by it, to the same extent as any other holder of Senior Indebtedness,
and nothing in this Indenture or any Additional Provisions shall deprive the
Trustee of any of its rights as such holder.

          With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article XV, and no implied
covenants or obligations with respect to the holders of such Senior Indebtedness
shall be read into this Indenture or any Additional Provisions against the
Trustee. The Trustee shall not owe or be deemed to owe any fiduciary duty to the
holders of such Senior Indebtedness and, subject to the provisions of Article VI
of this Indenture, the Trustee shall not be liable to any holder of such Senior
Indebtedness if it shall pay over or deliver to Securityholders, the Company or
any other Person money or assets to which any holder of such Senior Indebtedness
shall be entitled by virtue of this Article XV or otherwise.

          Nothing in this Article XV shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.06.

     SECTION 15.08. Subordination May Not Be Impaired.

          No right of any present or future holder of any Senior Indebtedness of
the Company to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company, or by any act or failure to act, in good faith, by any such holder, or
by any noncompliance by the Company, with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof that any such holder may
have or otherwise be charged with.

          Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness of the Company may, at any time and from time
to time, without the consent of or notice to the Trustee or the Securityholders,
without incurring responsibility to the Securityholders and without impairing or
releasing the subordination provided in this Article XV or the obligations
hereunder of the Securityholders to the holders of such Senior Indebtedness, do
any one or more of the following: (a) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, such Senior
Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (b) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (c) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (d) exercise or refrain from
exercising any rights against the Company, and any other Person.

          LaSalle Bank National Association, in its capacity as Trustee, hereby
accepts the trusts in this Indenture declared and provided, upon the terms and
conditions herein above set forth.


                                      -64-



          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed by their respective officers thereunto duly authorized, as of
the day and year first above written.

                                        INDEPENDENT BANK CORP.


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        LASALLE BANK NATIONAL ASSOCIATION,
                                        AS TRUSTEE


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

(8)  Independent Bank Corp.



                                    EXHIBIT A

                    FORM OF JUNIOR SUBORDINATED DEBT SECURITY
                                    DUE 2037

                           [FORM OF FACE OF SECURITY]

     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY
(A) TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO A "NON U.S. PERSON" IN
AN "OFFSHORE TRANSACTION" PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (D)
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2),
(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE
INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.

     THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND
WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY
UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT OR AN
APPLICABLE EXEMPTION THEREFROM.


                                       A-1



     THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),
(EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY
REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN
ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,
95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND
HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION
4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR
HOLDER OF THIS SECURITY OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE
REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN
EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO
WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING
ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY
USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE,
OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION
406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE
STATUTORY OR ADMINISTRATIVE EXEMPTION.

     IN CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SECURITY WILL DELIVER
TO THE COMPANY AND TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.

     THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A
PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS
THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A PRINCIPAL
AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT
WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER
OF THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO
HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.

     THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED STATES OR
ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE
CORPORATION. THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND THE
CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS INELIGIBLE AS
COLLATERAL


                                       A-2



FOR A LOAN BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AND IS NOT SECURED.


                                       A-3



               Form of Junior Subordinated Debt Security due 2037

                                       of

                             Independent Bank Corp.

     Independent Bank Corp., a bank holding company incorporated in
Massachusetts (the "Company"), for value received promises to pay to LaSalle
Bank National Association, not in its individual capacity but solely as
Institutional Trustee for Independent Capital Trust V, a Delaware statutory
trust (the "Securityholder"), or registered assigns, the principal sum of Fifty
One Million Five Hundred Forty Seven Thousand Dollars on March 15, 2037 and to
pay interest on said principal sum from December 28, 2006, or from the most
recent interest payment date (each such date, an "Interest Payment Date") to
which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein) in arrears on March 15, June 15, September 15 and
December 15 of each year commencing March 15, 2007, at a variable per annum rate
equal to LIBOR (as defined in the Indenture) plus 1.48% (the "Interest Rate")
(provided, however, that the Interest Rate for any Interest Payment Period may
not exceed the highest rate permitted by New York law, as the same may be
modified by United States law of general applicability) until the principal
hereof shall have become due and payable, and on any overdue principal and
(without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at an
annual rate equal to the Interest Rate in effect for each such Extension Period
compounded quarterly. The amount of interest payable on any Interest Payment
Date shall be computed on the basis of a 360-day year and the actual number of
days elapsed in the relevant interest period. Notwithstanding anything to the
contrary contained herein, if any Interest Payment Date, other than on the
Maturity Date, any Redemption Date (to the extent redeemed) or the Special
Redemption Date, falls on a day that is not a Business Day, then any interest
payable will be paid on, and such Interest Payment Date will be moved to, the
next succeeding Business Day, and additional interest will accrue for each day
that such payment is delayed as a result thereof. If the Maturity Date,
Redemption Date or Special Redemption Date falls on a day that is not a Business
Day, then the principal, premium, if any, and/or interest payable on such date
will be paid on the next succeeding Business Day, and no additional interest
will accrue (except that, if such Business Day falls in the next calendar year,
such payment will be made on the immediately preceding Business Day). The
interest installment so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Debt Security (or one or more Predecessor Securities,
as defined in said Indenture) is registered at the close of business on the
regular record date for such interest installment, except that interest and any
Deferred Interest payable on the Maturity Date shall be paid to the Person to
whom principal is paid. Any such interest installment not punctually paid or
duly provided for shall forthwith cease to be payable to the registered
Securityholders on such regular record date and may be paid to the Person in
whose name this Debt Security (or one or more Predecessor Debt Securities) is
registered at the close of business on a special record date to be fixed by the
Trustee for the payment of such defaulted interest, notice whereof shall be
given to the registered Securityholders not less than 10 days prior to such
special record date, all as more fully provided in the Indenture. The principal
of and interest on this Debt Security shall be payable at the office or agency
of the Trustee (or other Paying Agent appointed by the Company) maintained for
that purpose in any coin or currency of the United States of America that at the
time of payment is


                                       A-4



legal tender for payment of public and private debts; provided, however, that
payment of interest may be made at the option of the Company by check mailed to
the registered Securityholder at such address as shall appear in the Debt
Security Register or by wire transfer of immediately available funds to an
account appropriately designated by the holder hereof. Notwithstanding the
foregoing, so long as the holder of this Debt Security is the Institutional
Trustee, payment of the principal of and premium, if any, and interest on this
Debt Security shall be made in immediately available funds when due at such
place and to such account as may be designated by the Institutional Trustee. All
payments in respect of this Debt Security shall be payable in any coin or
currency of the United States of America that at the time of payment is legal
tender for payment of public and private debts.

          Upon submission of Notice (as defined in the Indenture) and so long as
no Event of Default pursuant to paragraphs (c), (e), (f) or (g) of Section 5.01
of the Indenture has occurred and is continuing, the Company shall have the
right under the Indenture, from time to time and without causing an Event of
Default, to defer payments of interest on the Debt Securities by extending the
interest distribution period on the Debt Securities at any time and from time to
time during the term of the Debt Securities, for up to 20 consecutive quarterly
periods (each such extended interest distribution period, an "Extension
Period"), during which Extension Period no interest shall be due and payable
(except any Additional Interest that may be due and payable). During any
Extension Period, interest will continue to accrue on the Debt Securities, and
interest on such accrued interest (such accrued interest and interest thereon
referred to herein as "Deferred Interest") will accrue at an annual rate equal
to the Interest Rate applicable during such Extension Period, compounded
quarterly from the date such Deferred Interest would have been payable were it
not for the Extension Period, to the extent permitted by law. No Extension
Period may end on a date other than an Interest Payment Date. At the end of any
such Extension Period the Company shall pay all Deferred Interest then accrued
and unpaid on the Debt Securities; provided, however, that no Extension Period
may extend beyond the Maturity Date, Redemption Date (to the extent redeemed) or
Special Redemption Date; and provided, further, however, during any such
Extension Period, the Company may not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock or (ii) make any payment of
principal of or premium, if any, or interest on or repay, repurchase or redeem
any debt securities of the Company that rank pari passu in all respects with or
junior in interest to the Debt Securities or (iii) make any payment under any
guarantees of the Company that rank in all respects pari passu with or junior in
respect to the Capital Securities Guarantee (other than (a) repurchases,
redemptions or other acquisitions of shares of capital stock of the Company (A)
in connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers,
directors or consultants, (B) in connection with a dividend reinvestment or
stockholder stock purchase plan or (C) in connection with the issuance of
capital stock of the Company (or securities convertible into or exercisable for
such capital stock), as consideration in an acquisition transaction entered into
prior to the applicable Extension Period, (b) as a result of any exchange,
reclassification, combination or conversion of any class or series of the
Company's capital stock (or any capital stock of a subsidiary of the Company)
for any class or series of the Company's capital stock or of any class or series
of the Company's indebtedness for any class or series of the Company's capital
stock, (c) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in


                                       A-5



connection with any stockholder's rights plan, or the issuance of rights, stock
or other property under any stockholder's rights plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks pari passu with or junior to
such stock). Prior to the termination of any Extension Period, the Company may
further extend such Extension Period; provided, that no Extension Period
(including all previous and further consecutive extensions that are part of such
Extension Period) shall exceed 20 consecutive quarterly periods, or extend
beyond the Maturity Date, Redemption Date (to the extent redeemed) or Special
Redemption Date. Upon the termination of any Extension Period and upon the
payment of all Deferred Interest, the Company may commence a new Extension
Period, subject to the foregoing requirements. No interest or Deferred Interest
shall be due and payable during an Extension Period, except at the end thereof,
but Deferred Interest shall accrue upon each installment of interest that would
otherwise have been due and payable during such Extension Period until such
installment is paid. The Company must give the Trustee notice of its election to
begin any Extension Period or extend an Extension Period ("Notice") not later
than the related regular record date for the relevant Interest Payment Date. The
Notice shall describe why the Company has elected to begin an Extension Period.
The Notice shall acknowledge and affirm the Company's understanding that it is
prohibited from issuing dividends and other distributions during the Extension
Period. Upon receipt of the Notice, the Placement Agent shall have the right, at
its sole discretion, to disclose the name of the Company, the fact that the
Company has elected to begin an Extension Period and other information that such
Placement Agent, at its sole discretion, deems relevant to the Company's
election to begin an Extension Period. The Trustee shall give notice of the
Company's election to begin a new Extension Period to the Securityholders.

          The indebtedness evidenced by this Debt Security is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Debt Security is
issued subject to the provisions of the Indenture with respect thereto. Each
holder of this Debt Security, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Trustee on such
Securityholder's behalf to take such action as may be necessary or appropriate
to acknowledge or effectuate the subordination so provided and (c) appoints the
Trustee such Securityholder's attorney-in-fact for any and all such purposes.
Each holder hereof, by such holder's acceptance hereof, hereby waives all notice
of the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such Securityholder upon said
provisions.

     The Company waives diligence, presentment, demand for payment, notice of
nonpayment, notice of protest, and all other demands and notices.

     This Debt Security shall not be entitled to any benefit under the Indenture
hereinafter referred to and shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been signed by
or on behalf of the Trustee.


                                       A-6



     The provisions of this Debt Security are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.


                                       A-7



     IN WITNESS WHEREOF, the Company has duly executed this certificate.

                                        INDEPENDENT BANK CORP.


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

Dated:                     , 2006
       --------------------

                          CERTIFICATE OF AUTHENTICATION

     This represents Debt Securities referred to in the within-mentioned
Indenture.


                                        LaSalle Bank National Association, not
                                        in its individual capacity but solely as
                                        Trustee


                                        By:
                                            ------------------------------------
                                            Authorized Signatory

Dated:                     , 2006
       --------------------


                                       A-8



                          [FORM OF REVERSE OF SECURITY]

     This Debt Security is one of a duly authorized series of Debt Securities of
the Company, all issued or to be issued pursuant to an Indenture (the
"Indenture"), dated as of December 28, 2006, duly executed and delivered between
the Company and LaSalle Bank National Association, as Trustee (the "Trustee"),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the holders of the
Debt Securities (referred to herein as the "Debt Securities") of which this Debt
Security is a part. The summary of the terms of this Debt Security contained
herein does not purport to be complete and is qualified by reference to the
Indenture.

     Upon the occurrence and continuation of a Tax Event, an Investment Company
Event or a Capital Treatment Event (each a "Special Event"), this Debt Security
may become due and payable, in whole or in part, at any time, within 90 days
following the occurrence of such Tax Event, Investment Company Event or Capital
Treatment Event (the "Special Redemption Date"), as the case may be, at the
Special Redemption Price.

     The Company shall also have the right to redeem this Debt Security at the
option of the Company, in whole or in part, on any March 15, June 15, September
15 or December 15 on or after March 15, 2012 (a "Redemption Date"), at the
Redemption Price.

     Any redemption pursuant to either of the two preceding paragraphs will be
made, subject to the receipt by the Company of prior approval from any
regulatory authority with jurisdiction over the Company if such approval is then
required under applicable capital guidelines or policies of such regulatory
authority, upon not less than 30 days' nor more than 60 days' notice. If the
Debt Securities are only partially redeemed by the Company, the Debt Securities
will be redeemed pro rata or by lot or by any other method utilized by the
Trustee.

     "Redemption Price" means 100% of the principal amount of the Debt
Securities being redeemed plus accrued and unpaid interest on such Debt
Securities to the Redemption Date.

     "Special Redemption Price" means, with respect to the redemption of any
Debt Security following a Special Event, an amount in cash equal to 103.525% of
the principal amount of Debt Securities to be redeemed prior to March 15, 2008
and thereafter equal to the percentage of the principal amount of the Debt
Securities that is specified below for the Special Redemption Date plus, in each
case, unpaid interest accrued thereon to the Special Redemption Date:



    Special Redemption
   During the 12-Month       Percentage of
Period Beginning March 15   Principal Amount
- -------------------------   ----------------
                         
2008                            103.140%
2009                            102.355%
2010                            101.570%
2011                            100.785%
2012 and thereafter             100.000%



                                       A-9



     In the event of redemption of this Debt Security in part only, a new Debt
Security or Debt Securities for the unredeemed portion hereof will be issued in
the name of the Securityholder hereof upon the cancellation hereof.

     In certain cases where an Event of Default pursuant to paragraphs (c), (e),
(f) or (g) of Section 5.01 of the Indenture shall have occurred and be
continuing, the principal of all of the Debt Securities may be declared, and, in
certain cases, shall ipso facto become, due and payable, and upon such
declaration of acceleration shall become due and payable, in each case, in the
manner, with the effect and subject to the conditions provided in the Indenture.

     The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Debt Securities at the time outstanding affected
thereby, as specified in the Indenture, to execute supplemental indentures for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Securityholders; provided, however,
that no such supplemental indenture shall, among other things, without the
consent of the holders of each Debt Security then outstanding and affected
thereby (i) change the Maturity Date of any Debt Security, or reduce the
principal amount thereof or any redemption premium thereon, or reduce the rate
(or manner of calculation of the rate) or extend the time of payment of interest
thereon, or reduce (other than as a result of the maturity or earlier redemption
of any such Debt Security in accordance with the terms of the Indenture and such
Debt Security) or increase the aggregate principal amount of Debt Securities
then outstanding, or change any of the redemption provisions, or make the
principal thereof or any interest or premium thereon payable in any coin or
currency other than United States Dollars, or impair or affect the right of any
Securityholder to institute suit for the payment thereof, or (ii) reduce the
aforesaid percentage of Debt Securities, the holders of which are required to
consent to any such supplemental indenture. The Indenture also contains
provisions permitting the holders of a majority in aggregate principal amount of
the Debt Securities at the time outstanding, on behalf of all of the
Securityholders, to waive any past default in the performance of any of the
covenants contained in the Indenture, or established pursuant to the Indenture,
and its consequences, except (a) a default in payments due in respect of any of
the Debt Securities, (b) in respect of covenants or provisions of the Indenture
which cannot be modified or amended without the consent of the holder of each
Debt Security affected, or (c) in respect of the covenants of the Company
relating to its ownership of Common Securities of the Trust. Any such consent or
waiver by the registered holder of this Debt Security (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such
Securityholder and upon all future holders and owners of this Debt Security and
of any Debt Security issued in exchange herefor or in place hereof (whether by
registration of transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Debt Security.

     No reference herein to the Indenture and no provision of this Debt Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay all payments due on this Debt Security at
the time and place and at the rate and in the money herein prescribed.


                                      A-10



     As provided in the Indenture and subject to certain limitations herein and
therein set forth, this Debt Security is transferable by the registered holder
hereof on the Debt Security Register of the Company, upon surrender of this Debt
Security for registration of transfer at the office or agency of the Trustee in
Chicago, Illinois accompanied by a written instrument or instruments of transfer
in form satisfactory to the Company or the Trustee duly executed by the
registered holder hereof or such Securityholder's attorney duly authorized in
writing, and thereupon one or more new Debt Securities of authorized
denominations and for the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be made for any
such registration of transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.

     Prior to due presentment for registration of transfer of this Debt
Security, the Company, the Trustee, any Authenticating Agent, any Paying Agent,
any transfer agent and the Debt Security Registrar may deem and treat the
registered holder hereof as the absolute owner hereof (whether or not this Debt
Security shall be overdue and notwithstanding any notice of ownership or writing
hereon) for the purpose of receiving payment of the principal of and premium, if
any, and interest on this Debt Security and for all other purposes, and neither
the Company nor the Trustee nor any Authenticating Agent nor any Paying Agent
nor any transfer agent nor any Debt Security Registrar shall be affected by any
notice to the contrary.

     No recourse shall be had for the payment of the principal of or the
interest on this Debt Security, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.

     The Debt Securities are issuable only in registered certificated form
without coupons. As provided in the Indenture and subject to certain limitations
herein and therein set forth, Debt Securities are exchangeable for a like
aggregate principal amount of Debt Securities of a different authorized
denomination, as requested by the Securityholder surrendering the same.

     All terms used in this Debt Security that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.

     THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE DEBT
SECURITIES, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).


                                      A-11

EX-4.15

                                                                    Exhibit 4.15




                        AMENDED AND RESTATED DECLARATION

                                    OF TRUST

                           INDEPENDENT CAPITAL TRUST V

                          Dated as of December 28, 2006




(9)  Independent Bank Corp.



                                TABLE OF CONTENTS



                                                                            PAGE
                                                                            ----
                                                                         
                                    ARTICLE I
                         INTERPRETATION AND DEFINITIONS

SECTION 1.1.    Definitions..............................................     1

                                   ARTICLE II
                                  ORGANIZATION

SECTION 2.1.    Name.....................................................     8
SECTION 2.2.    Office...................................................     8
SECTION 2.3.    Purpose..................................................     9
SECTION 2.4.    Authority................................................     9
SECTION 2.5.    Title to Property of the Trust...........................     9
SECTION 2.6.    Powers and Duties of the Trustees and the
                Administrators...........................................     9
SECTION 2.7.    Prohibition of Actions by the Trust and the
                Trustees.................................................    14
SECTION 2.8.    Powers and Duties of the Institutional Trustee...........    15
SECTION 2.9.    Certain Duties and Responsibilities of the
                Trustees and the Administrators..........................    16
SECTION 2.10.   Certain Rights of Institutional Trustee..................    18
SECTION 2.11.   Delaware Trustee.........................................    20
SECTION 2.12.   Execution of Documents...................................    21
SECTION 2.13.   Not Responsible for Recitals or Issuance of Securities...    21
SECTION 2.14.   Duration of Trust........................................    21
SECTION 2.15.   Mergers..................................................    21

                                   ARTICLE III
                                     SPONSOR

SECTION 3.1.    Sponsor's Purchase of Common Securities..................    23
SECTION 3.2.    Responsibilities of the Sponsor..........................    23

                                   ARTICLE IV
                           TRUSTEES AND ADMINISTRATORS

SECTION 4.1.    Number of Trustees.......................................    24



                                      -i-



                                TABLE OF CONTENTS
                                   (continued)



                                                                            PAGE
                                                                            ----
                                                                         
SECTION 4.2.    Delaware Trustee.........................................    24
SECTION 4.3.    Institutional Trustee; Eligibility.......................    24
SECTION 4.4.    Certain Qualifications of the Delaware Trustee
                Generally................................................    25
SECTION 4.5.    Administrators...........................................    25
SECTION 4.6.    Initial Delaware Trustee.................................    25
SECTION 4.7.    Appointment, Removal and Resignation of the
                Trustees and the Administrators..........................    25
SECTION 4.8.    Vacancies Among Trustees.................................    27
SECTION 4.9.    Effect of Vacancies......................................    27
SECTION 4.10.   Meetings of the Trustees and the Administrators..........    27
SECTION 4.11.   Delegation of Power......................................    28
SECTION 4.12.   Merger, Conversion, Consolidation or Succession to
                Business.................................................    28

                                    ARTICLE V
                                  DISTRIBUTIONS

SECTION 5.1.    Distributions............................................    28

                                   ARTICLE VI
                             ISSUANCE OF SECURITIES

SECTION 6.1.    General Provisions Regarding Securities..................    29
SECTION 6.2.    Paying Agent, Transfer Agent, Calculation
                Agent and Registrar......................................    30
SECTION 6.3.    Form and Dating..........................................    31
SECTION 6.4.    Book-Entry Capital Securities............................    31
SECTION 6.5.    Mutilated, Destroyed, Lost or Stolen Certificates........    33
SECTION 6.6.    Temporary Securities.....................................    33
SECTION 6.7.    Cancellation.............................................    34
SECTION 6.8.    Rights of Holders; Waivers of Past Defaults..............    34

                                   ARTICLE VII
                      DISSOLUTION AND TERMINATION OF TRUST



                                       ii



                                TABLE OF CONTENTS
                                   (continued)



                                                                            PAGE
                                                                            ----
                                                                         
SECTION 7.1.    Dissolution and Termination of Trust.....................    36

                                  ARTICLE VIII
                              TRANSFER OF INTERESTS

SECTION 8.1.    General..................................................    37
SECTION 8.2.    Transfer Procedures and Restrictions.....................    38
SECTION 8.3.    Deemed Security Holders..................................    41

                                   ARTICLE IX
               LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES,
                               TRUSTEES OR OTHERS

SECTION 9.1.    Liability................................................    41
SECTION 9.2.    Exculpation..............................................    42
SECTION 9.3.    Fiduciary Duty...........................................    43
SECTION 9.4.    Indemnification..........................................    43
SECTION 9.5.    Outside Businesses.......................................    46
SECTION 9.6.    Compensation; Fee........................................    47

                                    ARTICLE X
                                   ACCOUNTING

SECTION 10.1.   Fiscal Year..............................................    47
SECTION 10.2.   Certain Accounting Matters...............................    47
SECTION 10.3.   Banking..................................................    48
SECTION 10.4.   Withholding..............................................    48

                                   ARTICLE XI
                             AMENDMENTS AND MEETINGS

SECTION 11.1.   Amendments...............................................    49
SECTION 11.2.   Meetings of the Holders of the Securities;
                Action by Written Consent................................    51

                                   ARTICLE XII
          REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE

SECTION 12.1.   Representations and Warranties of
                Institutional Trustee....................................    52
SECTION 12.2.   Representations and Warranties of Delaware Trustee.......    53



                                      iii



                                TABLE OF CONTENTS
                                   (continued)



                                                                            PAGE
                                                                            ----
                                                                         
                                  ARTICLE XIII
                                  MISCELLANEOUS

SECTION 13.1.   Notices..................................................    54
SECTION 13.2.   Governing Law............................................    55
SECTION 13.3.   Submission to Jurisdiction...............................    55
SECTION 13.4.   Intention of the Parties.................................    56
SECTION 13.5.   Headings.................................................    56
SECTION 13.6.   Successors and Assigns...................................    56
SECTION 13.7.   Partial Enforceability...................................    56
SECTION 13.8.   Counterparts.............................................    56



                                       iv




                                TABLE OF CONTENTS
                                   (continued)



                                                                            PAGE
                                                                            ----
                                                                         
ANNEXES AND EXHIBITS

ANNEX I       Terms of TP Securities and Common Securities

EXHIBIT A-1   Form of Capital Security Certificate
EXHIBIT A-2   Form of Common Security Certificate



                                       -v-


                    AMENDED AND RESTATED DECLARATION OF TRUST

                                       OF

                           INDEPENDENT CAPITAL TRUST V

                                December 28, 2006

     AMENDED AND RESTATED DECLARATION OF TRUST (this "Declaration"), dated and
effective as of December 28, 2006, by the Trustees (as defined herein), the
Administrators (as defined herein), the Sponsor (as defined herein) and the
holders from time to time of undivided beneficial interests in the assets of the
Trust (as defined herein) to be issued pursuant to this Declaration.

     WHEREAS, the Delaware Trustee and the Sponsor established Independent
Capital Trust V (the "Trust"), a statutory trust under the Statutory Trust Act
(as defined herein), pursuant to a Declaration of Trust, dated as of October 12,
2006 (the "Original Declaration"), and a Certificate of Trust filed with the
Secretary of State of the State of Delaware on October 12, 2006, for the sole
purpose of issuing and selling certain securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in the Debentures (as defined herein) of the Debenture Issuer (as
defined herein) in connection with the issuance of the Capital Securities (as
defined herein);

     WHEREAS, as of the date hereof, no interests in the assets of the Trust
have been issued; and

     WHEREAS, all of the Trustees, the Administrators and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration.

     NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a statutory trust under the Statutory Trust Act and that this
Declaration constitutes the governing instrument of such statutory trust, and
that all assets contributed to the Trust will be held in trust for the benefit
of the holders, from time to time, of the securities representing undivided
beneficial interests in the assets of the Trust issued hereunder, subject to the
provisions of this Declaration, and, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties, intending to be legally bound hereby, amend
and restate in its entirety the Original Declaration and agree as follows:

                                    ARTICLE I
                         INTERPRETATION AND DEFINITIONS

     SECTION 1.1. Definitions. Unless the context otherwise requires:

          (a) capitalized terms used in this Declaration but not defined in the
preamble above or elsewhere herein have the respective meanings assigned to them
in this Section 1.1 or, if not defined in this Section 1.1 or elsewhere herein,
in the Indenture;

(9) Independent Bank Corp.


          (b) a term defined anywhere in this Declaration has the same meaning
throughout;

          (c) all references to "the Declaration" or "this Declaration" are to
this Declaration as modified, supplemented or amended from time to time;

          (d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to
this Declaration unless otherwise specified;

          (e) a term defined in the Trust Indenture Act (as defined herein) has
the same meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and

          (f) a reference to the singular includes the plural and vice versa.

     "Additional Interest" has the meaning set forth in Section 3.06 of the
Indenture.

     "Administrative Action" has the meaning set forth in paragraph 4(a) of
Annex I.

     "Administrators" means each of Denis Sheahan and Edward Seksay, solely in
such Person's capacity as Administrator of the Trust continued hereunder and not
in such Person's individual capacity, or such Administrator's successor in
interest in such capacity, or any successor appointed as herein provided.

     "Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.

     "Applicable Depositary Procedures" means, with respect to any transfer or
transaction involving a Book-Entry Capital Security, the rules and procedures of
the Depositary for such Book-Entry Capital Security, in each case to the extent
applicable to such transaction and as in effect from time to time.

     "Authorized Officer" of a Person means any Person that is authorized to
bind such Person.

     "Bankruptcy Event" means, with respect to any Person:

          (a) a court having jurisdiction in the premises enters a decree or
order for relief in respect of such Person in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appoints a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of such Person or for any substantial part of
its property, or orders the winding-up or liquidation of its affairs, and such
decree, appointment or order remains unstayed and in effect for a period of 90
consecutive days; or

          (b) such Person commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, consents
to the entry of an order for relief in an involuntary case under any such law,
or consents to the appointment of or


                                       -2-



taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of such Person of any substantial part of
its property, or makes any general assignment for the benefit of creditors, or
fails generally to pay its debts as they become due.

     "Book-Entry Capital Security" means a Capital Security, the ownership and
transfers of which shall be made through book entries by a Depositary.

     "Business Day" means any day other than Saturday, Sunday or any other day
on which banking institutions in Wilmington, Delaware or New York City or the
city of the Corporate Trust Office are permitted or required by any applicable
law or executive order to close.

     "Calculation Agent" has the meaning set forth in Section 1.01 of the
Indenture.

     "Capital Securities" has the meaning set forth in Section 6.1(a).

     "Capital Securities Purchase Agreements" means the Capital Securities
Purchase Agreement dated as of October 12, 2006 among the Trust, the Sponsor and
Alesco Preferred Funding XII, Ltd. and the Capital Securities Purchase Agreement
dated as of October 12, 2006 among the Trust, the Sponsor and Alesco Preferred
Funding XIII, Ltd. and the Capital Securities Purchase Agreement dated as of
October 12, 2006 among the Trust, the Sponsor and Alesco Preferred Funding XIV,
Ltd.

     "Capital Security Certificate" means a definitive Certificate registered in
the name of the Holder representing a Capital Security substantially in the form
of Exhibit A 1.

     "Capital Treatment Event" has the meaning set forth in paragraph 4(a) of
Annex I.

     "Certificate" means any certificate evidencing Securities.

     "Certificate of Trust" means the certificate of trust filed with the
Secretary of State of the State of Delaware with respect to the Trust, as
amended and restated from time to time.

     "Closing Date" means the date of execution and delivery of this
Declaration.

     "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.

     "Commission" means the United States Securities and Exchange Commission.

     "Common Securities" has the meaning set forth in Section 6.1(a).

     "Common Security Certificate" means a definitive Certificate registered in
the name of the Holder representing a Common Security substantially in the form
of Exhibit A-2.

     "Company Indemnified Person" means (a) any Administrator; (b) any Affiliate
of any Administrator; (c) any officers, directors, shareholders, members,
partners, employees, representatives or agents of any Administrator; or (d) any
officer, employee or agent of the Trust or its Affiliates.


                                       -3-



     "Corporate Trust Office" means the office of the Institutional Trustee at
which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office shall at all times be
located in the United States and at the date of execution of this Declaration is
located at LaSalle Bank National Association, 135 S. LaSalle Street, Suite 1511,
Chicago, Illinois 60603, Attn: CDO Trust Services Group - Independent Capital
Trust V.

     "Coupon Rate" has the meaning set forth in paragraph 2(a) of Annex I.

     "Covered Person" means: (a) any Administrator, officer, director,
shareholder, partner, member, representative, employee or agent of (i) the Trust
or (ii) the Trust's Affiliates; and (b) any Holder of Securities.

     "Debenture Issuer" means Independent Bank Corp., a bank holding company
incorporated in Massachusetts, in its capacity as issuer of the Debentures under
the Indenture.

     "Debenture Trustee" means LaSalle Bank National Association, not in its
individual capacity but solely as trustee under the Indenture until a successor
is appointed thereunder, and thereafter means such successor trustee.

     "Debentures" means the Junior Subordinated Debt Securities due March 15,
2037 to be issued by the Debenture Issuer under the Indenture.

     "Deferred Interest" means any interest on the Debentures that would have
been overdue and unpaid for more than one Distribution Payment Date but for the
imposition of an Extension Period, and the interest that shall accrue (to the
extent that the payment of such interest is legally enforceable) on such
interest at the Coupon Rate applicable during such Extension Period, compounded
quarterly from the date on which such Deferred Interest would otherwise have
been due and payable until paid or made available for payment.

     "Definitive Capital Securities" means any Capital Securities in definitive
form issued by the Trust.

     "Depositary" means an organization registered as a clearing agency under
the Exchange Act that is designated as Depositary by the Sponsor or any
successor thereto. DTC will be the initial Depositary.

     "Depositary Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Depositary effects
book-entry transfers and pledges of securities deposited with the Depositary.

     "Delaware Trustee" has the meaning set forth in Section 4.2.

     "Direct Action" has the meaning set forth in Section 2.8(e).

     "Distribution" means a distribution payable to Holders of Securities in
accordance with Section 5.1.


                                       -4-



     "Distribution Payment Date" has the meaning set forth in paragraph 2(e) of
Annex I.

     "DTC" means The Depository Trust Company or any successor thereto.

     "Distribution Payment Period" means the period from and including a
Distribution Payment Date, or in the case of the first Distribution Payment
Period, the original date of issuance of the Securities, to, but excluding, the
next succeeding Distribution Payment Date or, in the case of the last
Distribution Payment Period, the Redemption Date, Special Redemption Date or
Maturity Date (each as defined in the Indenture), as the case may be, for the
related Debentures.

     "Event of Default" means the occurrence of an Indenture Event of Default.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.

     "Extension Period" has the meaning set forth in paragraph 2(e) of Annex I.

     "Fiduciary Indemnified Person" shall mean each of the Institutional Trustee
(including in its individual capacity), the Delaware Trustee (including in its
individual capacity), any Affiliate of the Institutional Trustee or the Delaware
Trustee, and any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Institutional
Trustee or the Delaware Trustee.

     "Fiscal Year" has the meaning set forth in Section 10.1.

     "Global Capital Security" means a Capital Securities Certificate evidencing
ownership of Book-Entry Capital Securities.

     "Guarantee" means the Guarantee Agreement, dated as of the Closing Date, of
the Sponsor (the "Guarantor") in respect of the Capital Securities.

     "Holder" means a Person in whose name a Certificate representing a Security
is registered on the register maintained by or on behalf of the Registrar, such
Person being a beneficial owner within the meaning of the Statutory Trust Act.

     "Indemnified Person" means a Company Indemnified Person or a Fiduciary
Indemnified Person.

     "Indenture" means the Indenture, dated as of the Closing Date, between the
Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued.

     "Indenture Event of Default" means an "Event of Default" as defined in the
Indenture.

     "Initial Purchaser" means the Initial Purchaser of the Capital Securities.


                                       -5-



     "Institutional Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 4.3.

     "Investment Company" means an investment company as defined in the
Investment Company Act.

     "Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.

     "Investment Company Event" has the meaning set forth in paragraph 4(a) of
Annex I.

     "Legal Action" has the meaning set forth in Section 2.8(e).

     "LIBOR" means the London Interbank Offered Rate for U.S. Dollar deposits in
Europe as determined by the Calculation Agent according to paragraph 2(b) of
Annex I.

     "LIBOR Banking Day" has the meaning set forth in paragraph 2(b)(1) of Annex
I.

     "LIBOR Business Day" has the meaning set forth in paragraph 2(b)(1) of
Annex I.

     "LIBOR Determination Date" has the meaning set forth in paragraph 2(b)(1)
of Annex I.

     "Liquidation" has the meaning set forth in paragraph 3 of Annex I.

     "Liquidation Distribution" has the meaning set forth in paragraph 3 of
Annex I.

     "Majority in liquidation amount of the Securities" means Holders of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of
more than 50% of the aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.

     "Notice" has the meaning set forth in Section 2.11 of the Indenture.

     "Officers' Certificate" means, with respect to any Person, a certificate
signed by two Authorized Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Declaration shall include:

          (a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;

          (b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;

          (c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and


                                       -6-



          (d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.

     "Owner" means each Person who is the beneficial owner of Book-Entry Capital
Securities as reflected in the records of the Depositary or, if a Depositary
Participant is not the beneficial owner, then the beneficial owner as reflected
in the records of the Depositary Participant.

     "Paying Agent" has the meaning set forth in Section 6.2.

     "Payment Amount" has the meaning set forth in Section 5.1.

     "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

     "Placement Agreement" means the Placement Agreement relating to the
offering and sale of Capital Securities.

     "PORTAL" has the meaning set forth in Section 2.6(a)(i)(E).

     "Property Account" has the meaning set forth in Section 2.8(c).

     "Pro Rata" has the meaning set forth in paragraph 8 of Annex I.

     "QIB" means a "qualified institutional buyer" as defined under Rule 144A.

     "Quorum" means a majority of the Administrators or, if there are only two
Administrators, both of them.

     "Redemption Date" has the meaning set forth in paragraph 4(a) of Annex I.

     "Redemption/Distribution Notice" has the meaning set forth in paragraph
4(e) of Annex I.

     "Redemption Price" has the meaning set forth in paragraph 4(a) of Annex I.

     "Registrar" has the meaning set forth in Section 6.2.

     "Relevant Trustee" has the meaning set forth in Section 4.7(a).

     "Responsible Officer" means, with respect to the Institutional Trustee, any
officer within the Corporate Trust Office of the Institutional Trustee with
direct responsibility for the administration of this Declaration, including any
vice-president, any assistant vice-president, any secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or other
officer of the Corporate Trust Office of the Institutional Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means,


                                       -7-



with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of that officer's knowledge of and familiarity
with the particular subject.

     "Restricted Securities Legend" has the meaning set forth in Section 8.2(c).

     "Rule 144A" means Rule 144A under the Securities Act.

     "Rule 3a-5" means Rule 3a-5 under the Investment Company Act.

     "Rule 3a-7" means Rule 3a-7 under the Investment Company Act.

     "Securities" means the Common Securities and the Capital Securities, as
applicable.

     "Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor legislation.

     "Special Event" has the meaning set forth in paragraph 4(a) of Annex I.

     "Special Redemption Price" has the meaning set forth in paragraph 4(a) of
Annex I.

     "Sponsor" means Independent Bank Corp., a bank holding company that is a
U.S. Person incorporated in Massachusetts, or any successor entity in a merger,
consolidation or amalgamation that is a U.S. Person, in its capacity as sponsor
of the Trust.

     "Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code Section 3801 et seq., as it may be amended from time to time, or any
successor legislation.

     "Successor Delaware Trustee" has the meaning set forth in Section 4.7(e).

     "Successor Entity" has the meaning set forth in Section 2.15(b).

     "Successor Institutional Trustee" has the meaning set forth in Section
4.7(b).

     "Successor Securities" has the meaning set forth in Section 2.15(b).

     "Super Majority" has the meaning set forth in paragraph 5(b) of Annex I.

     "Tax Event" has the meaning set forth in paragraph 4(a) of Annex I.

     "10% in liquidation amount of the Securities" means Holders of outstanding
Securities voting together as a single class or, as the context may require,
Holders of outstanding Capital Securities or Holders of outstanding Common
Securities voting separately as a class, who are the record owners of 10% or
more of the aggregate liquidation amount (including the stated amount that would
be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.

     "Transfer Agent" has the meaning set forth in Section 6.2.


                                       -8-



     "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time-to-time, or any successor legislation.

     "Trustee" or "Trustees" means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance with
the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Trustees in accordance with the provisions
hereof, and references herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees hereunder.

     "Trust Property" means (a) the Debentures, (b) any cash on deposit in, or
owing to, the Property Account and (c) all proceeds and rights in respect of the
foregoing and any other property and assets for the time being held or deemed to
be held by the Institutional Trustee pursuant to the trusts of this Declaration.

     "U.S. Person" means a United States Person as defined in Section
7701(a)(30) of the Code.

                                   ARTICLE II
                                  ORGANIZATION

     SECTION 2.1. Name. The Trust is continued hereby and shall be known as
"Independent Capital Trust V," as such name may be modified from time to time by
the Administrators following written notice to the Institutional Trustee and the
Holders of the Securities. The Trust's activities may be conducted under the
name of the Trust or any other name deemed advisable by the Administrators.

     SECTION 2.2. Office. The address of the principal office of the Trust,
which shall be in a state of the United States or the District of Columbia, is
288 Union Street, Rockland, Massachusetts 02370. On ten Business Days' written
notice to the Institutional Trustee and the Holders of the Securities, the
Administrators may designate another principal office, which shall be in a state
of the United States or the District of Columbia.

     SECTION 2.3. Purpose. The exclusive purposes and functions of the Trust are
(a) to issue and sell the Securities representing undivided beneficial interests
in the assets of the Trust, (b) to invest the gross proceeds from such sale to
acquire the Debentures, (c) to facilitate direct investment in the assets of the
Trust through issuance of the Common Securities and the Capital Securities and
(d) except as otherwise limited herein, to engage in only those other activities
incidental thereto that are deemed necessary or advisable by the Institutional
Trustee, including, without limitation, those activities specified in this
Declaration. The Trust shall not borrow money, issue debt or reinvest proceeds
derived from investments, pledge any of its assets, or otherwise undertake (or
permit to be undertaken) any activity that would cause the Trust not to be
classified for United States federal income tax purposes as a grantor trust.

     SECTION 2.4. Authority. Except as specifically provided in this
Declaration, the Institutional Trustee shall have exclusive and complete
authority to carry out the purposes of the Trust. An action taken by a Trustee
on behalf of the Trust and in accordance with such Trustee's powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no Person shall be required to inquire into the
authority of the Trustees to


                                       -9-



bind the Trust. Persons dealing with the Trust are entitled to rely conclusively
on the power and authority of the Trustees as set forth in this Declaration. The
Administrators shall have only those ministerial duties set forth herein with
respect to accomplishing the purposes of the Trust and are not intended to be
trustees or fiduciaries with respect to the Trust or the Holders. The
Institutional Trustee shall have the right, but shall not be obligated except as
provided in Section 2.6, to perform those duties assigned to the Administrators.

     SECTION 2.5. Title to Property of the Trust. Except as provided in Section
2.6(g) and Section 2.8 with respect to the Debentures and the Property Account
or as otherwise provided in this Declaration, legal title to all assets of the
Trust shall be vested in the Trust. The Holders shall not have legal title to
any part of the assets of the Trust, but shall have an undivided beneficial
interest in the assets of the Trust.

     SECTION 2.6. Powers and Duties of the Trustees and the Administrators.

          (a) The Trustees and the Administrators shall conduct the affairs of
the Trust in accordance with the terms of this Declaration. Subject to the
limitations set forth in paragraph (b) of this Section, and in accordance with
the following provisions (i) and (ii), the Administrators and, at the direction
of the Administrators, the Trustees, shall have the authority to enter into all
transactions and agreements determined by the Administrators to be appropriate
in exercising the authority, express or implied, otherwise granted to the
Trustees or the Administrators, as the case may be, under this Declaration, and
to perform all acts in furtherance thereof, including without limitation, the
following:

               (i) Each Administrator shall have the power, duty and authority,
          and is hereby authorized, to act on behalf of the Trust with respect
          to the following matters:

                    (A) the issuance and sale of the Securities;

                    (B) to acquire the Debentures with the proceeds of the sale
               of the Securities; provided, however, that the Administrators
               shall cause legal title to the Debentures to be held of record in
               the name of the Institutional Trustee for the benefit of the
               Holders;

                    (C) to cause the Trust to enter into, and to execute,
               deliver and perform on behalf of the Trust, such agreements as
               may be necessary or desirable in connection with the purposes and
               function of the Trust, including agreements with the Paying
               Agent, a Debenture subscription agreement between the Trust and
               the Sponsor and a Common Securities subscription agreement
               between the Trust and the Sponsor;

                    (D) ensuring compliance with the Securities Act and
               applicable state securities or blue sky laws;

                    (E) if and at such time determined solely by the Sponsor at
               the request of the Holders, assisting in the designation of the
               Capital


                                      -10-



               Securities for trading in the Private Offering, Resales and
               Trading through the Automatic Linkages ("PORTAL") system if
               available;

                    (F) the sending of notices (other than notices of default)
               and other information regarding the Securities and the Debentures
               to the Holders in accordance with this Declaration, including
               notice of any notice received from the Debenture Issuer of its
               election to defer payments of interest on the Debentures by
               extending the interest payment period under the Indenture;

                    (G) the appointment of a Paying Agent, Transfer Agent and
               Registrar in accordance with this Declaration;

                    (H) execution and delivery of the Securities in accordance
               with this Declaration;

                    (I) execution and delivery of closing certificates pursuant
               to the Placement Agreement and the application for a taxpayer
               identification number;

                    (J) unless otherwise determined by the Holders of a Majority
               in liquidation amount of the Securities or as otherwise required
               by the Statutory Trust Act, to execute on behalf of the Trust
               (either acting alone or together with any or all of the
               Administrators) any documents that the Administrators have the
               power to execute pursuant to this Declaration;

                    (K) the taking of any action incidental to the foregoing as
               the Sponsor or an Administrator may from time to time determine
               is necessary or advisable to give effect to the terms of this
               Declaration for the benefit of the Holders (without consideration
               of the effect of any such action on any particular Holder);

                    (L) to establish a record date with respect to all actions
               to be taken hereunder that require a record date be established,
               including Distributions, voting rights, redemptions and
               exchanges, and to issue relevant notices to the Holders of
               Capital Securities and Holders of Common Securities as to such
               actions and applicable record dates;

                    (M) to duly prepare and file on behalf of the Trust all
               applicable tax returns and tax information reports that are
               required to be filed with respect to the Trust;

                    (N) to negotiate the terms of, and the execution and
               delivery of, the Placement Agreement and the Capital Securities
               Purchase Agreements related thereto, providing for the sale of
               the Capital Securities;

                    (O) to employ or otherwise engage employees, agents (who may
               be designated as officers with titles), managers, contractors,
               advisors,


                                      -11-



               attorneys and consultants and pay reasonable compensation for
               such services;

                    (P) to incur expenses that are necessary or incidental to
               carry out any of the purposes of the Trust;

                    (Q) to give the certificate required by Section 314(a)(4) of
               the Trust Indenture Act to the Institutional Trustee, which
               certificate may be executed by an Administrator; and

                    (R) to take all action that may be necessary or appropriate
               for the preservation and the continuation of the Trust's valid
               existence, rights, franchises and privileges as a statutory trust
               under the laws of each jurisdiction (other than the State of
               Delaware) in which such existence is necessary to protect the
               limited liability of the Holders of the Capital Securities or to
               enable the Trust to effect the purposes for which the Trust was
               created.

               (ii) As among the Trustees and the Administrators, the
          Institutional Trustee shall have the power, duty and authority, and is
          hereby authorized, to act on behalf of the Trust with respect to the
          following matters:

                    (A) the establishment of the Property Account;

                    (B) the receipt of the Debentures;

                    (C) the collection of interest, principal and any other
               payments made in respect of the Debentures in the Property
               Account;

                    (D) the distribution through the Paying Agent of amounts
               owed to the Holders in respect of the Securities;

                    (E) the exercise of all of the rights, powers and privileges
               of a holder of the Debentures;

                    (F) the sending of notices of default and other information
               regarding the Securities and the Debentures to the Holders in
               accordance with this Declaration;

                    (G) the distribution of the Trust Property in accordance
               with the terms of this Declaration;

                    (H) to the extent provided in this Declaration, the winding
               up of the affairs of and liquidation of the Trust;

                    (I) after any Event of Default (of which the Institutional
               Trustee has knowledge (as provided in Section 2.10(m) hereof))
               (provided, that such Event of Default is not by or with respect
               to the


                                      -12-



               Institutional Trustee), the taking of any action incidental to
               the foregoing as the Institutional Trustee may from time to time
               determine is necessary or advisable to give effect to the terms
               of this Declaration and protect and conserve the Trust Property
               for the benefit of the Holders (without consideration of the
               effect of any such action on any particular Holder);

                    (J) to take all action that may be necessary or appropriate
               for the preservation and the continuation of the Trust's valid
               existence, rights, franchises and privileges as a statutory trust
               under the laws of the State of Delaware to protect the limited
               liability of the Holders of the Capital Securities or to enable
               the Trust to effect the purposes for which the Trust was created;
               and

                    (K) to undertake any actions set forth in Section 317(a) of
               the Trust Indenture Act.

               (iii) The Institutional Trustee shall have the power and
          authority, and is hereby authorized, to act on behalf of the Trust
          with respect to any of the duties, liabilities, powers or the
          authority of the Administrators set forth in Section 2.6(a)(i)(E) and
          (F) herein but shall not have a duty to do any such act unless
          specifically requested to do so in writing by the Sponsor, and shall
          then be fully protected in acting pursuant to such written request;
          and in the event of a conflict between the action of the
          Administrators and the action of the Institutional Trustee, the action
          of the Institutional Trustee shall prevail.

          (b) So long as this Declaration remains in effect, the Trust (or the
Trustees or Administrators acting on behalf of the Trust) shall not undertake
any business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, neither the Trustees nor the Administrators
may cause the Trust to (i) acquire any investments or engage in any activities
not authorized by this Declaration, (ii) sell, assign, transfer, exchange,
mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or
interests therein, including to Holders, except as expressly provided herein,
(iii) take any action that would cause (or in the case of the Institutional
Trustee, to the actual knowledge of a Responsible Officer would cause) the Trust
to fail or cease to qualify as a "grantor trust" for United States federal
income tax purposes, (iv) incur any indebtedness for borrowed money or issue any
other debt or (v) take or consent to any action that would result in the
placement of a lien on any of the Trust Property. The Institutional Trustee
shall, at the sole cost and expense of the Trust, defend all claims and demands
of all Persons at any time claiming any lien on any of the Trust Property
adverse to the interest of the Trust or the Holders in their capacity as
Holders.

          (c) In connection with the issuance and sale of the Capital
Securities, the Sponsor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Sponsor in furtherance of the following prior to the date
of this Declaration are hereby ratified and confirmed in all respects):

               (i) the taking of any action necessary to obtain an exemption
          from the Securities Act;


                                      -13-



               (ii) the determination of the States in which to take appropriate
          action to qualify or register for sale all or part of the Capital
          Securities and the determination of any and all such acts, other than
          actions which must be taken by or on behalf of the Trust, and the
          advisement of and direction to the Trustees of actions they must take
          on behalf of the Trust, and the preparation for execution and filing
          of any documents to be executed and filed by the Trust or on behalf of
          the Trust, as the Sponsor deems necessary or advisable in order to
          comply with the applicable laws of any such States in connection with
          the sale of the Capital Securities; and

               (iii) the taking of any other actions necessary or desirable to
          carry out any of the foregoing activities.

          (d) Notwithstanding anything herein to the contrary, the
Administrators, the Institutional Trustee and the Holders of a Majority in
liquidation amount of the Common Securities are authorized and directed to
conduct the affairs of the Trust and to operate the Trust so that (i) the Trust
will not be deemed to be an Investment Company required to be registered under
the Investment Company Act (in the case of the Institutional Trustee, to the
actual knowledge of a Responsible Officer), and (ii) the Trust will not fail to
be classified as a grantor trust for United States federal income tax purposes
(in the case of the Institutional Trustee, to the actual knowledge of a
Responsible Officer) and (iii) the Trust will not take any action inconsistent
with the treatment of the Debentures as indebtedness of the Debenture Issuer for
United States federal income tax purposes (in the case of the Institutional
Trustee, to the actual knowledge of a Responsible Officer). In this connection,
the Institutional Trustee, the Administrators and the Holders of a Majority in
liquidation amount of the Common Securities are authorized to take any action,
not inconsistent with applicable laws or this Declaration, as amended from time
to time, that each of the Institutional Trustee, the Administrators and such
Holders determine in their discretion to be necessary or desirable for such
purposes, even if such action adversely affects the interests of the Holders of
the Capital Securities.

          (e) All expenses incurred by the Administrators or the Trustees
pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the
Trustees shall have no obligations with respect to such expenses.

          (f) The assets of the Trust shall consist of the Trust Property.

          (g) Legal title to all Trust Property shall be vested at all times in
the Institutional Trustee (in its capacity as such) and shall be held and
administered by the Institutional Trustee for the benefit of the Trust in
accordance with this Declaration.

          (h) If the Institutional Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Declaration and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Institutional Trustee or to such Holder, then and in
every such case the Sponsor, the Institutional Trustee and the Holders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Institutional Trustee and the Holders shall continue as though
no such proceeding had been instituted.


                                      -14-



     SECTION 2.7. Prohibition of Actions by the Trust and the Trustees. The
Trust shall not, and the Institutional Trustee and the Administrators shall not,
and the Administrators shall cause the Trust not to, engage in any activity
other than as required or authorized by this Declaration. In particular, the
Trust shall not, and the Institutional Trustee and the Administrators shall not
cause the Trust to:

          (a) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of the Securities
pursuant to the terms of this Declaration and of the Securities;

          (b) acquire any assets other than as expressly provided herein;

          (c) possess Trust Property for other than a Trust purpose;

          (d) make any loans or incur any indebtedness other than loans
represented by the Debentures;

          (e) possess any power or otherwise act in such a way as to vary the
Trust Property or the terms of the Securities;

          (f) issue any securities or other evidences of beneficial ownership
of, or beneficial interest in, the Trust other than the Securities; or

          (g) other than as provided in this Declaration (including Annex I),
(i) direct the time, method and place of exercising any trust or power conferred
upon the Debenture Trustee with respect to the Debentures, (ii) waive any past
default that is waivable under the Indenture, (iii) exercise any right to
rescind or annul any declaration that the principal of all the Debentures shall
be due and payable, or (iv) consent to any amendment, modification or
termination of the Indenture or the Debentures where such consent shall be
required unless the Trust shall have received a written opinion of counsel
experienced in such matters to the effect that such amendment, modification or
termination will not cause the Trust to cease to be classified as a grantor
trust for United States federal income tax purposes.

     SECTION 2.8. Powers and Duties of the Institutional Trustee.

          (a) The legal title to the Debentures shall be owned by and held of
record in the name of the Institutional Trustee in trust for the benefit of the
Trust. The right, title and interest of the Institutional Trustee to the
Debentures shall vest automatically in each Person who may hereafter be
appointed as Institutional Trustee in accordance with Section 4.7. Such vesting
and cessation of title shall be effective whether or not conveyancing documents
with regard to the Debentures have been executed and delivered.

          (b) The Institutional Trustee shall not transfer its right, title and
interest in the Debentures to the Administrators or to the Delaware Trustee.

          (c) The Institutional Trustee shall:


                                      -15-



               (i) establish and maintain a segregated non-interest bearing
          trust account (the "Property Account") in the United States (as
          defined in Treasury Regulations Section 301.7701-7), in the name of
          and under the exclusive control of the Institutional Trustee, and
          maintained in the Institutional Trustee's trust department, on behalf
          of the Holders of the Securities and, upon the receipt of payments of
          funds made in respect of the Debentures held by the Institutional
          Trustee, deposit such funds into the Property Account and make
          payments to the Holders of the Capital Securities and Holders of the
          Common Securities from the Property Account in accordance with Section
          5.1. Funds in the Property Account shall be held uninvested until
          disbursed in accordance with this Declaration;

               (ii) engage in such ministerial activities as shall be necessary
          or appropriate to effect the redemption of the Capital Securities and
          the Common Securities to the extent the Debentures are redeemed or
          mature; and

               (iii) upon written notice of distribution issued by the
          Administrators in accordance with the terms of the Securities, engage
          in such ministerial activities as shall be necessary or appropriate to
          effect the distribution of the Debentures to Holders of Securities
          upon the occurrence of certain circumstances pursuant to the terms of
          the Securities.

          (d) The Institutional Trustee shall take all actions and perform such
duties as may be specifically required of the Institutional Trustee pursuant to
the terms of the Securities.

          (e) The Institutional Trustee may bring or defend, pay, collect,
compromise, arbitrate, resort to legal action with respect to, or otherwise
adjust claims or demands of or against, the Trust (a "Legal Action") which arise
out of or in connection with an Event of Default of which a Responsible Officer
of the Institutional Trustee has actual knowledge or the Institutional Trustee's
duties and obligations under this Declaration or the Trust Indenture Act;
provided, however, that if an Event of Default has occurred and is continuing
and such event is attributable to the failure of the Debenture Issuer to pay
interest or premium, if any, on or principal of the Debentures on the date such
interest, premium, if any, or principal is otherwise payable (or in the case of
redemption, on the redemption date), then a Holder of the Capital Securities may
directly institute a proceeding for enforcement of payment to such Holder of the
principal of or premium, if any, or interest on the Debentures having a
principal amount equal to the aggregate liquidation amount of the Capital
Securities of such Holder (a "Direct Action") on or after the respective due
date specified in the Debentures. In connection with such Direct Action, the
rights of the Holders of the Common Securities will be subrogated to the rights
of such Holder of the Capital Securities to the extent of any payment made by
the Debenture Issuer to such Holder of the Capital Securities in such Direct
Action; provided, however, that a Holder of the Common Securities may exercise
such right of subrogation only if no Event of Default with respect to the
Capital Securities has occurred and is continuing.

          (f) The Institutional Trustee shall continue to serve as a Trustee
until either:

               (i) the Trust has been completely liquidated and the proceeds of
          the liquidation distributed to the Holders of the Securities pursuant
          to the terms of the


                                      -16-



          Securities and this Declaration (including Annex I) and the
          certificate of cancellation referenced in Section 7.1(b) has been
          filed; or

               (ii) a Successor Institutional Trustee has been appointed and has
          accepted that appointment in accordance with Section 4.7.

          (g) The Institutional Trustee shall have the legal power to exercise
all of the rights, powers and privileges of a holder of the Debentures under the
Indenture and, if an Event of Default occurs and is continuing, the
Institutional Trustee may, for the benefit of Holders of the Securities, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to this Declaration (including Annex I) and the terms of the
Securities.

          (h) The Institutional Trustee must exercise the powers set forth in
this Section 2.8 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 2.3, and the Institutional Trustee shall not
take any action that is inconsistent with the purposes and functions of the
Trust set out in Section 2.3.

     SECTION 2.9. Certain Duties and Responsibilities of the Trustees and the
Administrators.

          (a) The Institutional Trustee, before the occurrence of any Event of
Default (of which the Institutional Trustee has knowledge (as provided in
Section 2.10(m) hereof)) and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case an Event of Default (of
which the Institutional Trustee has knowledge (as provided in Section 2.10(m)
hereof)), has occurred (that has not been cured or waived pursuant to Section
6.8), the Institutional Trustee shall exercise such of the rights and powers
vested in it by this Declaration, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

          (b) The duties and responsibilities of the Trustees and the
Administrators shall be as provided by this Declaration and, in the case of the
Institutional Trustee, by the Trust Indenture Act. Notwithstanding the
foregoing, no provision of this Declaration shall require any Trustee or
Administrator to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity satisfactory to it
against such risk or liability is not reasonably assured to it. Whether or not
therein expressly so provided, every provision of this Declaration relating to
the conduct or affecting the liability of or affording protection to the
Trustees or the Administrators shall be subject to the provisions of this
Article. Nothing in this Declaration shall be construed to release a Trustee
from liability for its own negligent action, its own negligent failure to act,
or its own willful misconduct or bad faith. Nothing in this Declaration shall be
construed to release an Administrator from liability for its own gross negligent
action, its own gross negligent failure to act, or its own willful misconduct or
bad faith. To the extent that, at law or in equity, a Trustee or an
Administrator has duties and liabilities relating to the Trust or to the
Holders, such Trustee or Administrator shall not be liable to the Trust or to
any Holder for such Trustee's or


                                      -17-



Administrator's good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties and
liabilities of the Administrators or the Trustees otherwise existing at law or
in equity, are agreed by the Sponsor and the Holders to replace such other
duties and liabilities of the Administrators or the Trustees.

          (c) All payments made by the Institutional Trustee or a Paying Agent
in respect of the Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to enable the Institutional Trustee
or a Paying Agent to make payments in accordance with the terms hereof. Each
Holder, by its acceptance of a Security, agrees that it will look solely to the
revenue and proceeds from the Trust Property to the extent legally available for
distribution to it as herein provided and that the Trustees and the
Administrators are not personally liable to it for any amount distributable in
respect of any Security or for any other liability in respect of any Security.
This Section 2.9(c) does not limit the liability of the Trustees expressly set
forth elsewhere in this Declaration or, in the case of the Institutional
Trustee, in the Trust Indenture Act.

          (d) No provision of this Declaration shall be construed to relieve the
Institutional Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct or bad faith with
respect to matters that are within the authority of the Institutional Trustee
under this Declaration, except that:

               (i) the Institutional Trustee shall not be liable for any error
          or judgment made in good faith by a Responsible Officer of the
          Institutional Trustee, unless it shall be proved that the
          Institutional Trustee was negligent in ascertaining the pertinent
          facts;

               (ii) the Institutional Trustee shall not be liable with respect
          to any action taken or omitted to be taken by it in good faith in
          accordance with the direction of the Holders of not less than a
          Majority in liquidation amount of the Capital Securities or the Common
          Securities, as applicable, relating to the time, method and place of
          conducting any proceeding for any remedy available to the
          Institutional Trustee, or exercising any trust or power conferred upon
          the Institutional Trustee under this Declaration;

               (iii) the Institutional Trustee's sole duty with respect to the
          custody, safe keeping and physical preservation of the Debentures and
          the Property Account shall be to deal with such property in a similar
          manner as the Institutional Trustee deals with similar property for
          its own account, subject to the protections and limitations on
          liability afforded to the Institutional Trustee under this Declaration
          and the Trust Indenture Act;

               (iv) the Institutional Trustee shall not be liable for any
          interest on any money received by it except as it may otherwise agree
          in writing with the Sponsor; and money held by the Institutional
          Trustee need not be segregated from other funds held by it except in
          relation to the Property Account maintained by the


                                      -18-



          Institutional Trustee pursuant to Section 2.8(c)(i) and except to the
          extent otherwise required by law; and

               (v) the Institutional Trustee shall not be responsible for
          monitoring the compliance by the Administrators or the Sponsor with
          their respective duties under this Declaration, nor shall the
          Institutional Trustee be liable for any default or misconduct of the
          Administrators or the Sponsor.

     SECTION 2.10. Certain Rights of Institutional Trustee. Subject to the
provisions of Section 2.9.

          (a) the Institutional Trustee may conclusively rely and shall fully be
protected in acting or refraining from acting in good faith upon any resolution,
written opinion of counsel, certificate, written representation of a Holder or
transferee, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
appraisal, bond, debenture, note, other evidence of indebtedness or other paper
or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;

          (b) if (i) in performing its duties under this Declaration, the
Institutional Trustee is required to decide between alternative courses of
action, (ii) in construing any of the provisions of this Declaration, the
Institutional Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein, or (iii) the Institutional Trustee is unsure of the
application of any provision of this Declaration, then, except as to any matter
as to which the Holders of Capital Securities are entitled to vote under the
terms of this Declaration, the Institutional Trustee may deliver a notice to the
Sponsor requesting the Sponsor's opinion as to the course of action to be taken
and the Institutional Trustee shall take such action, or refrain from taking
such action, as the Institutional Trustee in its sole discretion shall deem
advisable and in the best interests of the Holders, in which event the
Institutional Trustee shall have no liability except for its own negligence,
willful misconduct or bad faith;

          (c) any direction or act of the Sponsor or the Administrators
contemplated by this Declaration shall be sufficiently evidenced by an Officers'
Certificate;

          (d) whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved or
established before undertaking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and conclusively rely upon
an Officers' Certificate which, upon receipt of such request, shall be promptly
delivered by the Sponsor or the Administrators;

          (e) the Institutional Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;

          (f) the Institutional Trustee may consult with counsel of its
selection (which counsel may be counsel to the Sponsor or any of its Affiliates)
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or


                                      -19-



omitted by it hereunder in good faith and in reliance thereon and in accordance
with such advice; the Institutional Trustee shall have the right at any time to
seek instructions concerning the administration of this Declaration from any
court of competent jurisdiction;

          (g) the Institutional Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Declaration at the request or
direction of any of the Holders pursuant to this Declaration, unless such
Holders shall have offered to the Institutional Trustee security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction; provided,
that nothing contained in this Section 2.10(g) shall be taken to relieve the
Institutional Trustee, upon the occurrence of an Event of Default (of which the
Institutional Trustee has knowledge (as provided in Section 2.10(m) hereof))
that has not been cured or waived, of its obligation to exercise the rights and
powers vested in it by this Declaration;

          (h) the Institutional Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless requested in writing to do so by one or more Holders, but
the Institutional Trustee may make such further inquiry or investigation into
such facts or matters as it may see fit;

          (i) the Institutional Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys and the Institutional Trustee shall not be responsible for
any misconduct or negligence on the part of, or for the supervision of, any such
agent or attorney appointed with due care by it hereunder;

          (j) whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action hereunder,
the Institutional Trustee (i) may request instructions from the Holders of the
Common Securities and the Capital Securities, which instructions may be given
only by the Holders of the same proportion in liquidation amount of the Common
Securities and the Capital Securities as would be entitled to direct the
Institutional Trustee under the terms of the Common Securities and the Capital
Securities in respect of such remedy, right or action, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be fully protected in acting in
accordance with such instructions;

          (k) except as otherwise expressly provided in this Declaration, the
Institutional Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Declaration;

          (l) when the Institutional Trustee incurs expenses or renders services
in connection with a Bankruptcy Event, such expenses (including the fees and
expenses of its counsel) and the compensation for such services are intended to
constitute expenses of administration under any bankruptcy law or law relating
to creditors rights generally;


                                      -20-


          (m) the Institutional Trustee shall not be charged with knowledge of
an Event of Default unless a Responsible Officer of the Institutional Trustee
has actual knowledge of such event or the Institutional Trustee receives written
notice of such event from any Holder, except with respect to an Event of Default
pursuant to Sections 5.01(a), 5.01(b) or 5.01(c) of the Indenture (other than an
Event of Default resulting from the default in the payment of Additional
Interest or premium, if any, if the Institutional Trustee does not have actual
knowledge or written notice that such payment is due and payable), of which the
Institutional Trustee shall be deemed to have knowledge;

          (n) any action taken by the Institutional Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Institutional Trustee or its agents alone shall be sufficient
and effective to perform any such action and no third party shall be required to
inquire as to the authority of the Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration, both of
which shall be conclusively evidenced by the Institutional Trustee's or its
agent's taking such action; and

          (o) no provision of this Declaration shall be deemed to impose any
duty or obligation on the Institutional Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Institutional Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty.

     SECTION 2.11. Delaware Trustee. Notwithstanding any other provision of this
Declaration other than Section 4.2, the Delaware Trustee shall not be entitled
to exercise any powers, nor shall the Delaware Trustee have any of the duties
and responsibilities of any of the Trustees or the Administrators described in
this Declaration (except as may be required under the Statutory Trust Act).
Except as set forth in Section 4.2, the Delaware Trustee shall be a Trustee for
the sole and limited purpose of fulfilling the requirements of Section 3807 of
the Statutory Trust Act.

     SECTION 2.12. Execution of Documents. Unless otherwise determined in
writing by the Institutional Trustee, and except as otherwise required by the
Statutory Trust Act, the Institutional Trustee, or any one or more of the
Administrators, as the case may be, is authorized to execute and deliver on
behalf of the Trust any documents, agreements, instruments or certificates that
the Trustees or the Administrators, as the case may be, have the power and
authority to execute pursuant to Section 2.6.

     SECTION 2.13. Not Responsible for Recitals or Issuance of Securities. The
recitals contained in this Declaration and the Securities shall be taken as the
statements of the Sponsor, and the Trustees do not assume any responsibility for
their correctness. The Trustees make no representations as to the value or
condition of the property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration, the
Debentures or the Securities.


                                      -21-



     SECTION 2.14. Duration of Trust. The Trust, unless dissolved pursuant to
the provisions of Article VII hereof, shall have existence for thirty-five (35)
years from the Closing Date.

     SECTION 2.15. Mergers.

          (a) The Trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described in this Section 2.15 and except with respect to the distribution of
Debentures to Holders of Securities pursuant to Section 7.1(a)(iv) of the
Declaration or Section 3 of Annex I.

          (b) The Trust may, with the consent of the Administrators and the
Institutional Trustee (which consent will not be unreasonably withheld) and
without the consent of the Holders of the Capital Securities, consolidate,
amalgamate, merge with or into, or be replaced by, or convey, transfer or lease
its properties and assets as an entirety or substantially as an entirety to a
trust organized as such under the laws of any state; provided, that:

               (i) if the Trust is not the survivor, such successor entity (the
          "Successor Entity") either:

                    (A) expressly assumes all of the obligations of the Trust
               under the Securities; or

                    (B) substitutes for the Securities other securities having
               substantially the same terms as the Securities (the "Successor
               Securities") so that the Successor Securities rank the same as
               the Securities rank with respect to Distributions and payments
               upon Liquidation, redemption and otherwise;

               (ii) the Sponsor expressly appoints a trustee of the Successor
          Entity that possesses the same powers and duties as the Institutional
          Trustee;

               (iii) the Capital Securities or any Successor Securities
          (excluding any securities substituted for the Common Securities) are
          listed or quoted, or any Successor Securities will be listed or quoted
          upon notification of issuance, on any national securities exchange or
          with another organization on which the Capital Securities are then
          listed or quoted, if any;

               (iv) such merger, consolidation, amalgamation, replacement,
          conveyance, transfer or lease does not cause the rating, if any, on
          the Capital Securities (including any Successor Securities) to be
          downgraded or withdrawn by any nationally recognized statistical
          rating organization, if the Capital Securities are then rated;

               (v) such merger, consolidation, amalgamation, replacement,
          conveyance, transfer or lease does not adversely affect the rights,
          preferences and privileges of the Holders of the Securities (including
          any Successor Securities) in


                                      -22-



          any material respect (other than with respect to any dilution of such
          Holders' interests in the Successor Entity as a result of such merger,
          consolidation, amalgamation or replacement);

               (vi) such Successor Entity has a purpose substantially identical
          to that of the Trust;

               (vii) prior to such merger, consolidation, amalgamation,
          replacement, conveyance, transfer or lease, the Trust has received a
          written opinion of a nationally recognized independent counsel to the
          Trust experienced in such matters to the effect that:

                    (A) such merger, consolidation, amalgamation, replacement,
               conveyance, transfer or lease does not adversely affect the
               rights, preferences and privileges of the Holders of the
               Securities (including any Successor Securities) in any material
               respect (other than with respect to any dilution of the Holders'
               interests in the Successor Entity);

                    (B) following such merger, consolidation, amalgamation,
               replacement, conveyance, transfer or lease, neither the Trust nor
               the Successor Entity will be required to register as an
               Investment Company; and

                    (C) following such merger, consolidation, amalgamation,
               replacement, conveyance, transfer or lease, the Trust (or the
               Successor Entity) will continue to be classified as a grantor
               trust for United States federal income tax purposes;

               (viii) the Sponsor guarantees the obligations of such Successor
          Entity under the Successor Securities to the same extent provided by
          the Guarantee, the Debentures and this Declaration; and

               (ix) prior to such merger, consolidation, amalgamation,
          replacement, conveyance, transfer or lease, the Institutional Trustee
          shall have received an Officers' Certificate of the Administrators and
          an opinion of counsel, each to the effect that all conditions
          precedent of this paragraph (b) to such transaction have been
          satisfied.

          (c) Notwithstanding Section 2.15(b), the Trust shall not, except with
the consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to, any other Person or permit any other Person to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or Successor Entity to be classified as other than a grantor trust for
United States federal income tax purposes.


                                      -23-



                                   ARTICLE III
                                     SPONSOR

     SECTION 3.1. Sponsor's Purchase of Common Securities. On the Closing Date,
the Sponsor will purchase all of the Common Securities issued by the Trust, in
an amount at least equal to 3% of the capital of the Trust, at the same time as
the Capital Securities are sold.

     SECTION 3.2. Responsibilities of the Sponsor. In connection with the issue
and sale of the Capital Securities, the Sponsor shall have the exclusive right
and responsibility and sole decision to engage in, or direct the Administrators
to engage in, the following activities:

          (a) to determine the States in which to take appropriate action to
qualify or register for sale of all or part of the Capital Securities and to do
any and all such acts, other than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and prepare for execution and filing
any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States;

          (b) to prepare for filing and request the Administrators to cause the
filing by the Trust, as may be appropriate, of an application to the PORTAL
system, for listing or quotation upon notice of issuance of any Capital
Securities, as requested by the Holders of not less than a Majority in
liquidation amount of the Capital Securities; and

          (c) to negotiate the terms of and/or execute and deliver on behalf of
the Trust, the Placement Agreement and other related agreements providing for
the sale of the Capital Securities.

                                   ARTICLE IV
                           TRUSTEES AND ADMINISTRATORS

     SECTION 4.1. Number of Trustees. The number of Trustees initially shall be
two, and:

          (a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and

          (b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holder of a Majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holder of
the Common Securities; provided, however, that there shall be a Delaware Trustee
if required by Section 4.2; and there shall always be one Trustee who shall be
the Institutional Trustee, and such Trustee may also serve as Delaware Trustee
if it meets the applicable requirements, in which case Section 2.11 shall have
no application to such entity in its capacity as Institutional Trustee.

     SECTION 4.2. Delaware Trustee. If required by the Statutory Trust Act, one
Trustee (the "Delaware Trustee") shall be:

          (a) a natural person who is a resident of the State of Delaware; or


                                      -24-


          (b) if not a natural person, an entity which is organized under the
laws of the United States or any state thereof or the District of Columbia, has
its principal place of business in the State of Delaware, and otherwise meets
the requirements of applicable law, including Section 3807 of the Statutory
Trust Act.

     SECTION 4.3. Institutional Trustee; Eligibility.

          (a) There shall at all times be one Trustee which shall act as
Institutional Trustee which shall:

               (i) not be an Affiliate of the Sponsor;

               (ii) not offer or provide credit or credit enhancement to the
          Trust; and

               (iii) be a banking corporation or national association organized
          and doing business under the laws of the United States of America or
          any state thereof or of the District of Columbia and authorized under
          such laws to exercise corporate trust powers, having a combined
          capital and surplus of at least fifty million U.S. dollars
          ($50,000,000), and subject to supervision or examination by federal,
          state or District of Columbia authority. If such corporation or
          national association publishes reports of condition at least annually,
          pursuant to law or to the requirements of the supervising or examining
          authority referred to above, then for the purposes of this Section
          4.3(a)(iii), the combined capital and surplus of such corporation or
          national association shall be deemed to be its combined capital and
          surplus as set forth in its most recent report of condition so
          published.

          (b) If at any time the Institutional Trustee shall cease to be
eligible to so act under Section 4.3(a), the Institutional Trustee shall
immediately resign in the manner and with the effect set forth in Section 4.7.

          (c) If the Institutional Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Institutional Trustee shall either eliminate such interest or resign, to the
extent and in the manner provided by, and subject to this Declaration.

          (d) The initial Institutional Trustee shall be LaSalle Bank National
Association.

     SECTION 4.4. Certain Qualifications of the Delaware Trustee Generally. The
Delaware Trustee shall be a U.S. Person and either a natural person who is at
least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.

     SECTION 4.5. Administrators. Each Administrator shall be a U.S. Person.

     There shall at all times be at least one Administrator. Except where a
requirement for action by a specific number of Administrators is expressly set
forth in this Declaration and except with respect to any action the taking of
which is the subject of a meeting of the Administrators, any action required or
permitted to be taken by the Administrators may be taken


                                      -25-



by, and any power of the Administrators may be exercised by, or with the consent
of, any one such Administrator acting alone.

     SECTION 4.6. Initial Delaware Trustee. The initial Delaware Trustee shall
be Christiana Bank & Trust Company.

     SECTION 4.7. Appointment, Removal and Resignation of the Trustees and the
Administrators.

          (a) No resignation or removal of any Trustee (the "Relevant Trustee")
and no appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of this Section 4.7.

          (b) Subject to Section 4.7(a), a Relevant Trustee may resign at any
time by giving written notice thereof to the Holders of the Securities and by
appointing a successor Relevant Trustee, except in the case of the Delaware
Trustee's successor which shall be appointed by Holders of at least a Majority
in liquidation amount of the Common Securities. Upon the resignation of the
Institutional Trustee, the Institutional Trustee shall appoint a successor by
requesting from at least three Persons meeting the eligibility requirements
their expenses and charges to serve as the successor Institutional Trustee on a
form provided by the Administrators, and selecting the Person who agrees to the
lowest reasonable expense and charges (the "Successor Institutional Trustee").
If the instrument of acceptance by the successor Relevant Trustee required by
this Section 4.7 shall not have been delivered to the Relevant Trustee within 60
days after the giving of such notice of resignation or delivery of the
instrument of removal, the Relevant Trustee may petition, at the expense of the
Trust, any federal, state or District of Columbia court of competent
jurisdiction for the appointment of a successor Relevant Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Relevant Trustee. The Institutional Trustee shall have no liability for the
selection of such successor pursuant to this Section 4.7.

          (c) Unless an Event of Default shall have occurred and be continuing,
any Trustee may be removed at any time by an act of the Holders of a Majority in
liquidation amount of the Common Securities. If any Trustee shall be so removed,
the Holders of the Common Securities, by act of the Holders of a Majority in
liquidation amount of the Common Securities delivered to the Relevant Trustee,
shall promptly appoint a successor Relevant Trustee, and such successor Trustee
shall comply with the applicable requirements of this Section 4.7. If an Event
of Default shall have occurred and be continuing, the Institutional Trustee or
the Delaware Trustee, or both of them, may be removed by the act of the Holders
of a Majority in liquidation amount of the Capital Securities, delivered to the
Relevant Trustee (in its individual capacity and on behalf of the Trust). If any
Trustee shall be so removed, the Holders of Capital Securities, by act of the
Holders of a Majority in liquidation amount of the Capital Securities then
outstanding delivered to the Relevant Trustee, shall promptly appoint a
successor Relevant Trustee or Trustees, and such successor Trustee shall comply
with the applicable requirements of this Section 4.7. If no successor Relevant
Trustee shall have been so appointed by the Holders of a Majority in liquidation
amount of the Capital Securities and accepted appointment in the manner required
by this Section 4.7 within 30 days after delivery of an instrument of removal,
the


                                      -26-



Relevant Trustee or any Holder who has been a Holder of the Securities for
at least six months may, on behalf of himself and all others similarly situated,
petition any federal, state or District of Columbia court of competent
jurisdiction for the appointment of a successor Relevant Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a successor Relevant Trustee or Trustees.

          (d) The Institutional Trustee shall give notice of each resignation
and each removal of a Trustee and each appointment of a successor Trustee to all
Holders and to the Sponsor. Each notice shall include the name of the successor
Relevant Trustee and the address of its Corporate Trust Office if it is the
Institutional Trustee.

          (e) Notwithstanding the foregoing or any other provision of this
Declaration, in the event a Delaware Trustee who is a natural person dies or is
adjudged by a court to have become incompetent or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled by the
Institutional Trustee (provided the Institutional Trustee satisfies the
requirements of a Delaware Trustee as set forth in Section 4.2) following the
procedures in this Section 4.7 (with the successor being a Person who satisfies
the eligibility requirement for a Delaware Trustee set forth in this
Declaration) (the "Successor Delaware Trustee").

          (f) In case of the appointment hereunder of a successor Relevant
Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with
respect to the Securities shall execute and deliver an amendment hereto wherein
each successor Relevant Trustee shall accept such appointment and which (a)
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Securities and the Trust and (b) shall add to or change any of the provisions of
this Declaration as shall be necessary to provide for or facilitate the
administration of the Trust by more than one Relevant Trustee, it being
understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on request of the Trust or any successor Relevant Trustee, such retiring
Relevant Trustee shall duly assign, transfer and deliver to such successor
Relevant Trustee all Trust Property, all proceeds thereof and money held by such
retiring Relevant Trustee hereunder with respect to the Securities and the Trust
subject to the payment of all unpaid fees, expenses and indemnities of such
retiring Relevant Trustee.

          (g) No Institutional Trustee or Delaware Trustee shall be liable for
the acts or omissions to act of any Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be.

          (h) The Holders of the Capital Securities will have no right to vote
to appoint, remove or replace the Administrators, which voting rights are vested
exclusively in the Holders of the Common Securities.


                                      -27-



          (i) Any successor Delaware Trustee shall file an amendment to the
Certificate of Trust with the Secretary of State of the State of Delaware
identifying the name and principal place of business of such Delaware Trustee in
the State of Delaware.

          (j) Any Administrator may be removed or replaced, as the case may be,
at any time by the Sponsor; provided, however, such removal may not violate
Section 4.5 hereof.

          (k) A retiring or resigning Administrator shall be required to give at
least 90 days written notice to the Sponsor.

     SECTION 4.8. Vacancies Among Trustees. If a Trustee ceases to hold office
for any reason and the number of Trustees is not reduced pursuant to Section
4.1, or if the number of Trustees is increased pursuant to Section 4.1, a
vacancy shall occur. A resolution certifying the existence of such vacancy by
the Trustees or, if there are more than two, a majority of the Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 4.7.

     SECTION 4.9. Effect of Vacancies. The death, resignation, retirement,
removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to
perform the duties of a Trustee shall not operate to dissolve, terminate or
annul the Trust or terminate this Declaration. Whenever a vacancy in the number
of Trustees shall occur, until such vacancy is filled by the appointment of a
Trustee in accordance with Section 4.7, the Institutional Trustee shall have all
the powers granted to the Trustees and shall discharge all the duties imposed
upon the Trustees by this Declaration.

     SECTION 4.10. Meetings of the Trustees and the Administrators. Meetings of
the Trustees or the Administrators shall be held from time to time upon the call
of any Trustee or Administrator, as applicable. Regular meetings of the Trustees
and the Administrators, respectively, may be in person in the United States or
by telephone, at a place (if applicable) and time fixed by resolution of the
Trustees or the Administrators, as applicable. Notice of any in-person meetings
of the Trustees or the Administrators shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 48 hours before such meeting. Notice of any telephonic
meetings of the Trustees or the Administrators or any committee thereof shall be
hand delivered or otherwise delivered in writing (including by facsimile, with a
hard copy by overnight courier) not less than 24 hours before a meeting. Notices
shall contain a brief statement of the time, place and anticipated purposes of
the meeting. The presence (whether in person or by telephone) of a Trustee or an
Administrator, as the case may be, at a meeting shall constitute a waiver of
notice of such meeting except where a Trustee or an Administrator, as the case
may be, attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been lawfully
called or convened. Unless provided otherwise in this Declaration, any action of
the Trustees or the Administrators, as the case may be, may be taken at a
meeting by vote of a majority of the Trustees or the Administrators present
(whether in person or by telephone) and eligible to vote with respect to such
matter; provided, that, in the case of the Administrators, a Quorum is present,
or without a meeting by the unanimous written consent of the Trustees or the
Administrators, as the case may be. Meetings of the Trustees and the


                                      -28-



Administrators together shall be held from time to time upon the call of any
Trustee or Administrator.

     SECTION 4.11. Delegation of Power.

          (a) Any Trustee or any Administrator, as the case may be, may, by
power of attorney consistent with applicable law, delegate to any other natural
person over the age of 21 that is a U.S. Person his or her power for the purpose
of executing any documents, instruments or other writings contemplated in
Section 2.6.

          (b) The Trustees shall have power to delegate from time to time to
such of their number or to any officer of the Trust that is a U.S. Person, the
doing of such things and the execution of such instruments or other writings
either in the name of the Trust or the names of the Trustees or otherwise as the
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.

     SECTION 4.12. Merger, Conversion, Consolidation or Succession to Business.

          Any Person into which the Institutional Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either may
be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Institutional Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or substantially
all the corporate trust business of the Institutional Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Institutional Trustee
or the Delaware Trustee, as the case may be, hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided such Person shall be otherwise qualified and eligible under this
Article and, provided, further, that such Person shall file an amendment to the
Certificate of Trust with the Secretary of State of the State of Delaware as
contemplated in Section 4.7(i).

                                    ARTICLE V
                                  DISTRIBUTIONS

     SECTION 5.1. Distributions.

          (a) Holders shall receive Distributions in accordance with the
applicable terms of the relevant Holder's Securities. Distributions shall be
made on the Capital Securities and the Common Securities in accordance with the
preferences set forth in their respective terms. If and to the extent that the
Debenture Issuer makes a payment of interest (including any Additional Interest
or Deferred Interest) or premium, if any, on and/or principal on the Debentures
held by the Institutional Trustee (the amount of any such payment being a
"Payment Amount"), the Institutional Trustee shall and is directed, to the
extent funds are available in the Property Account for that purpose, to make a
distribution (a "Distribution") of the Payment Amount to Holders. For the
avoidance of doubt, funds in the Property Account shall not be distributed to
Holders to the extent of any taxes payable by the Trust, in the case of
withholding taxes, as determined by the Institutional Trustee or any Paying
Agent and, in the case of taxes other than withholding tax taxes, as determined
by the Administrators in a written notice to the Institutional Trustee.


                                      -29-



          (b) As a condition to the payment of any principal of or interest on
the Securities without the imposition of withholding tax, the Administrators
shall require the previous delivery of properly completed and signed applicable
U.S. federal income tax certifications (generally, an Internal Revenue Service
Form W-9 (or applicable successor form) in the case of a person that is a
"United States person" within the meaning of Section 7701(a)(30) of the Code or
an Internal Revenue Service Form W-8 (or applicable successor form) in the case
of a person that is not a "United States person" within the meaning of Section
7701(a)(30) of the Code, and any other certification acceptable to it to enable
the Institutional Trustee or any Paying Agent to determine their respective
duties and liabilities with respect to any taxes or other charges that they may
be required to pay, deduct or withhold in respect of such Securities.

                                   ARTICLE VI
                             ISSUANCE OF SECURITIES

     SECTION 6.1. General Provisions Regarding Securities.

          (a) The Administrators shall on behalf of the Trust issue one series
of capital securities, evidenced by a certificate substantially in the form of
Exhibit A-1, representing undivided beneficial interests in the assets of the
Trust and having such terms as are set forth in Annex I (the "Capital
Securities"), and one series of common securities, evidenced by a certificate
substantially in the form of Exhibit A-2, representing undivided beneficial
interests in the assets of the Trust and having such terms as are set forth in
Annex I (the "Common Securities"). The Trust shall issue no securities or other
interests in the assets of the Trust other than the Capital Securities and the
Common Securities. The Capital Securities rank pari passu and payment thereon
shall be made Pro Rata with the Common Securities except that, where an Event of
Default has occurred and is continuing, the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights to payment of the
Holders of the Capital Securities.

          (b) The Certificates shall be signed on behalf of the Trust by one or
more Administrators. Such signature shall be the facsimile or manual signature
of any Administrator. In case any Administrator of the Trust who shall have
signed any of the Securities shall cease to be such Administrator before the
Certificates so signed shall be delivered by the Trust, such Certificates
nevertheless may be delivered as though the person who signed such Certificates
had not ceased to be such Administrator. Any Certificate may be signed on behalf
of the Trust by such person who, at the actual date of execution of such
Security, shall be an Administrator of the Trust, although at the date of the
execution and delivery of the Declaration any such person was not such an
Administrator. A Capital Security shall not be valid until authenticated by the
manual signature of an Authorized Officer of the Institutional Trustee. Such
signature shall be conclusive evidence that the Capital Security has been
authenticated under this Declaration. Upon written order of the Trust signed by
one Administrator, the Institutional Trustee shall authenticate the Capital
Securities for original issue. The Institutional Trustee may appoint an
authenticating agent that is a U.S. Person acceptable to the Trust to
authenticate the Capital Securities. A Common Security need not be so
authenticated and shall be valid upon execution by one or more Administrators.


                                      -30-



          (c) The Capital Securities issued pursuant to Regulation S of the
Securities Act or to QIBs shall be, except as provided in Section 6.4,
Book-Entry Capital Securities issued in the form of one or more Global Capital
Securities registered in the name of the Depositary, or its nominee and
deposited with the Depositary or a custodian for the Depositary for credit by
the Depositary to the respective accounts of the Depositary Participants thereof
(or such other accounts as they may direct).

          (d) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.

          (e) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable, and each Holder thereof shall be entitled to the benefits
provided by this Declaration.

          (f) Every Person, by virtue of having become a Holder in accordance
with the terms of this Declaration, shall be deemed to have expressly assented
and agreed to the terms of, and shall be bound by, this Declaration and the
Guarantee.

     SECTION 6.2. Paying Agent, Transfer Agent, Calculation Agent and Registrar.

          (a) The Trust shall maintain an office or agency where the Securities
may be presented for payment (the "Paying Agent"), and an office or agency where
Securities may be presented for registration of transfer or exchange (the
"Transfer Agent"). The Trust hereby appoints the Institutional Trustee as Paying
Agent and Transfer Agent at LaSalle Bank National Association, CDO Trust
Services Group, 135 South LaSalle Street, Suite 1511, Chicago, Illinois 60603 -
Independent Capital Trust V. The Trust shall also keep or cause to be kept a
register for the purpose of registering Securities and transfers and exchanges
of Securities, such register to be held by a registrar (the "Registrar"). The
Administrators may appoint the Paying Agent, the Registrar and the Transfer
Agent, and may appoint one or more additional Paying Agents, one or more
co-Registrars, or one or more co-Transfer Agents in such other locations as it
shall determine. The term "Paying Agent" includes any additional Paying Agent,
the term "Registrar" includes any additional Registrar or co-Registrar and the
term "Transfer Agent" includes any additional Transfer Agent or co-Transfer
Agent. The Administrators may change any Paying Agent, Transfer Agent or
Registrar at any time without prior notice to any Holder. The Administrators
shall notify the Institutional Trustee of the name and address of any Paying
Agent, Transfer Agent and Registrar not a party to this Declaration. The
Administrators hereby initially appoint the Institutional Trustee to act as
Registrar for the Capital Securities and the Common Securities at its Corporate
Trust Office. The Institutional Trustee or any of its Affiliates in the United
States may act as Paying Agent, Transfer Agent or Registrar.

          (b) The Trust shall also appoint a Calculation Agent, which shall
determine the Coupon Rate in accordance with the terms of the Securities. The
Trust initially appoints the Institutional Trustee as Calculation Agent.


                                      -31-



     SECTION 6.3. Form and Dating.

          (a) The Capital Securities and the Institutional Trustee's certificate
of authentication thereon shall be substantially in the form of Exhibit A-1, and
the Common Securities shall be substantially in the form of Exhibit A-2, each of
which is hereby incorporated in and expressly made a part of this Declaration.
Certificates may be typed, printed, lithographed or engraved or may be produced
in any other manner as is reasonably acceptable to the Administrators, as
conclusively evidenced by their execution thereof. The Certificates may have
letters, numbers, notations or other marks of identification or designation and
such legends or endorsements required by law, stock exchange rule, agreements to
which the Trust is subject, if any, or usage (provided, that any such notation,
legend or endorsement is in a form acceptable to the Sponsor). The Trust at the
direction of the Sponsor shall furnish any such legend not contained in Exhibit
A-1 to the Institutional Trustee in writing. Each Capital Security shall be
dated the date of its authentication. The terms and provisions of the Securities
set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and
A-2 are part of the terms of this Declaration and to the extent applicable, the
Institutional Trustee, the Delaware Trustee, the Administrators and the Sponsor,
by their execution and delivery of this Declaration, expressly agree to such
terms and provisions and to be bound thereby. Capital Securities will be issued
only in blocks having a stated liquidation amount of not less than $100,000 and
multiples of $1,000 in excess thereof.

          (b) The Capital Securities sold by the Trust to the initial purchasers
pursuant to the Placement Agreement and the Capital Securities Purchase
Agreements shall be issued in book entry form, registered in the name of Cede &
Co., as nominee on behalf of the Depository Trust Company, without coupons and
with the Restricted Securities Legend.

     SECTION 6.4. Book-Entry Capital Securities.

          (a) A Global Capital Security may be exchanged, in whole or in part,
for Definitive Capital Securities Certificates registered in the names of Owners
only if such exchange complies with Article VIII and (i) the Depositary advises
the Administrators and the Institutional Trustee in writing that the Depositary
is no longer willing or able properly to discharge its responsibilities with
respect to the Global Capital Security, and no qualified successor is appointed
by the Administrators within ninety (90) days of receipt of such notice, (ii)
the Depositary ceases to be a clearing agency registered under the Exchange Act
and the Administrators fail to appoint a qualified successor within ninety (90)
days of obtaining knowledge of such event, (iii) the Administrators at their
option advise the Institutional Trustee in writing that the Trust elects to
terminate the book-entry system through the Depositary or (iv) an Indenture
Event of Default has occurred and is continuing. Upon the occurrence of any
event specified in clause (i), (ii), (iii) or (iv) above, the Administrators
shall notify the Depositary and instruct the Depositary to notify all Owners of
Book-Entry Capital Securities and the Institutional Trustee of the occurrence of
such event and of the availability of Definitive Capital Securities Certificates
to Owners of the Capital Securities requesting the same. Upon the issuance of
Definitive Capital Securities Certificates, the Administrators and the
Institutional Trustee shall recognize the Holders of the Definitive Capital
Securities Certificates as Holders. Notwithstanding the foregoing, if an Owner
of a beneficial interest in a Global Capital Security wishes at any time to
transfer an interest in such Global Capital Security to a Person other than a


                                      -32-



QIB, such transfer shall be effected, subject to the Applicable Depository
Procedures, in accordance with the provisions of this Section 6.4 and Article
VIII, and the transferee shall receive a Definitive Capital Securities
Certificate in connection with such transfer. A holder of a Definitive Capital
Securities Certificate that is a QIB may upon request, and in accordance with
the provisions of this Section 6.4 and Article VIII, exchange such Definitive
Capital Securities Certificate for a beneficial interest in a Global Capital
Security.

          (b) If any Global Capital Security is to be exchanged for Definitive
Capital Securities Certificates or canceled in part, or if any Definitive
Capital Securities Certificate is to be exchanged in whole or in part for any
Global Capital Security, then either (i) such Global Capital Security shall be
so surrendered for exchange or cancellation as provided in this Section 6.4 and
Article VIII or (ii) the aggregate liquidation amount represented by such Global
Capital Security shall be reduced, subject to Section 6.3, or increased by an
amount equal to the liquidation amount represented by that portion of the Global
Capital Security to be so exchanged or canceled, or equal to the liquidation
amount represented by such Definitive Capital Securities Certificates to be so
exchanged for any Global Capital Security, as the case may be, by means of an
appropriate adjustment made on the records of the Securities Registrar,
whereupon the Institutional Trustee, in accordance with the Applicable
Depositary Procedures, shall instruct the Depositary or its authorized
representative to make a corresponding adjustment to its records. Upon any such
surrender to the Administrators or the Registrar of any Global Capital Security
or Securities by the Depositary, accompanied by registration instructions, the
Administrators, or any one of them, shall execute the Definitive Capital
Securities Certificates in accordance with the instructions of the Depositary.
None of the Registrar, Administrators, or the Institutional Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be fully protected in relying on, such instructions.

          (c) Every Definitive Capital Securities Certificate executed and
delivered upon registration or transfer of, or in exchange for or in lieu of, a
Global Capital Security or any portion thereof shall be executed and delivered
in the form of, and shall be, a Global Capital Security, unless such Definitive
Capital Securities Certificate is registered in the name of a Person other than
the Depositary for such Global Capital Security or a nominee thereof.

          (d) The Depositary or its nominee, as registered owner of a Global
Capital Security, shall be the Holder of such Global Capital Security for all
purposes under this Declaration and the Global Capital Security, and Owners with
respect to a Global Capital Security shall hold such interests pursuant to the
Applicable Depositary Procedures. The Registrar, the Administrators and the
Institutional Trustee shall be entitled to deal with the Depositary for all
purposes of this Declaration relating to the Global Capital Securities
(including the payment of the liquidation amount of and Distributions on the
Book-Entry Capital Securities represented thereby and the giving of instructions
or directions by Owners of Book-Entry Capital Securities represented thereby and
the giving of notices) as the sole Holder of the Book-Entry Capital Securities
represented thereby and shall have no obligations to the Owners thereof. None of
the Administrators, the Institutional Trustee nor the Registrar shall have any
liability in respect of any transfers effected by the Depositary.

          (e) The rights of the Owners of the Book-Entry Capital Securities
shall be exercised only through the Depositary and shall be limited to those
established by law, the


                                      -33-



Applicable Depositary Procedures and agreements between such Owners and the
Depositary and/or the Depositary Participants; provided, solely for the purpose
of determining whether the Holders of the requisite amount of Capital Securities
have voted on any matter provided for in this Declaration, to the extent that
Capital Securities are represented by a Global Capital Security, the
Administrators and the Institutional Trustee may conclusively rely on, and shall
be fully protected in relying on, any written instrument (including a proxy)
delivered to the Institutional Trustee by the Depositary setting forth the
Owners' votes or assigning the right to vote on any matter to any other Persons
either in whole or in part. To the extent that Capital Securities are
represented by a Global Capital Security, the initial Depositary will make
book-entry transfers among the Depositary Participants and receive and transmit
payments on the Capital Securities that are represented by a Global Capital
Security to such Depositary Participants, and none of the Sponsor, the
Administrators or the Institutional Trustee shall have any responsibility or
obligation with respect thereto.

          (f) To the extent that a notice or other communication to the Holders
is required under this Declaration, for so long as Capital Securities are
represented by a Global Capital Security, the Administrator and the
Institutional Trustee shall give all such notices and communications to the
Depositary, and shall have no obligations to the Owners.

     SECTION 6.5. Mutilated, Destroyed, Lost or Stolen Certificates. If: (a) any
mutilated Certificates should be surrendered to the Registrar, or if the
Registrar shall receive evidence to its satisfaction of the destruction, loss or
theft of any Certificate; and (b) there shall be delivered to the Registrar, the
Administrators and the Institutional Trustee such security or indemnity as may
be required by them to hold each of them harmless; then, in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
an Administrator on behalf of the Trust shall execute (and in the case of a
Capital Security Certificate, the Institutional Trustee shall authenticate) and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like denomination. In connection with
the issuance of any new Certificate under this Section 6.5, the Registrar or the
Administrators may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith. Any
duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the relevant Securities, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.

     SECTION 6.6. Temporary Securities. Until definitive Securities are ready
for delivery, the Administrators may prepare and, in the case of the Capital
Securities, the Institutional Trustee shall authenticate, temporary Securities.
Temporary Securities shall be substantially in form of definitive Securities but
may have variations that the Administrators consider appropriate for temporary
Securities. Without unreasonable delay, the Administrators shall prepare and, in
the case of the Capital Securities, the Institutional Trustee shall authenticate
definitive Securities in exchange for temporary Securities.

     SECTION 6.7. Cancellation. The Administrators at any time may deliver
Securities to the Registrar for cancellation. The Registrar shall forward to the
Institutional Trustee any Securities surrendered to it for registration of
transfer, redemption or payment. The Institutional Trustee shall promptly cancel
all Securities surrendered for registration of transfer, payment, replacement or
cancellation and shall dispose of such canceled Securities in accordance with
its


                                      -34-



standard procedures or otherwise as the Administrators direct. The
Administrators may not issue new Securities to replace Securities that have been
paid or, except for Securities surrendered for purposes of transfer or exchange,
that have been delivered to the Institutional Trustee for cancellation.

     SECTION 6.8. Rights of Holders; Waivers of Past Defaults.

          (a) The legal title to the Trust Property is vested exclusively in the
Institutional Trustee (in its capacity as such) in accordance with Section 2.5,
and the Holders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Securities and they shall have no right to call for any partition or division of
property, profits or rights of the Trust except as described below. The
Securities shall be personal property giving only the rights specifically set
forth therein and in this Declaration. The Securities shall have no, and the
issuance of the Securities shall not be subject to, preemptive or other similar
rights and when issued and delivered to Holders against payment of the purchase
price therefor, the Securities will be fully paid and nonassessable by the
Trust.

          (b) For so long as any Capital Securities remain outstanding, if, upon
an Indenture Event of Default under paragraphs (c), (e), (f) or (g) of Section
5.01 of the Indenture, the Debenture Trustee fails or the holders of not less
than 25% in principal amount of the outstanding Debentures fail to declare the
principal of all of the Debentures to be immediately due and payable, the
Holders of not less than a Majority in liquidation amount of the Capital
Securities then outstanding shall have the right to make such declaration by a
notice in writing to the Institutional Trustee, the Sponsor and the Debenture
Trustee.

          (c) Upon an Indenture Event of Default under paragraphs (c), (e), (f)
or (g) of Section 5.01 of the Indenture at any time after a declaration of
acceleration of maturity of the Debentures has been made and before a judgment
or decree for payment of the money due has been obtained by the Debenture
Trustee as provided in the Indenture, if the Institutional Trustee, subject to
the provisions hereof, fails to annul any such declaration and waive such
default, the Holders of not less than a Majority in liquidation amount of the
Capital Securities, by written notice to the Institutional Trustee, the Sponsor
and the Debenture Trustee, may rescind and annul such declaration and its
consequences if:

               (i) the Sponsor has paid or deposited with the Debenture Trustee
          a sum sufficient to pay

                    (A) all overdue installments of interest on all of the
               Debentures;

                    (B) any accrued Deferred Interest on all of the Debentures;

                    (C) all payments on any Debentures that have become due
               otherwise than by such declaration of acceleration and interest
               and Deferred Interest thereon at the rate borne by the
               Debentures; and

                    (D) all sums paid or advanced by the Debenture Trustee under
               the Indenture and the reasonable compensation, documented
               expenses,


                                      -35-



               disbursements and advances of the Debenture Trustee and the
               Institutional Trustee, their agents and counsel; and

               (ii) all Events of Default with respect to the Debentures, other
          than the non-payment of the principal of or premium, if any, on the
          Debentures that has become due solely by such acceleration, have been
          cured or waived as provided in Section 5.07 of the Indenture.

          (d) The Holders of not less than a Majority in liquidation amount of
the Capital Securities may, on behalf of the Holders of all the Capital
Securities, waive any past default or Event of Default, except a default or
Event of Default in the payment of principal or interest (unless such default or
Event of Default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee) or a default or Event of Default in
respect of a covenant or provision that under the Indenture cannot be modified
or amended without the consent of the holder of each outstanding Debenture. No
such rescission shall affect any subsequent default or impair any right
consequent thereon.

          (e) Upon receipt by the Institutional Trustee of written notice
declaring such an acceleration, or rescission and annulment thereof, by Holders
of any part of the Capital Securities, a record date shall be established for
determining Holders of outstanding Capital Securities entitled to join in such
notice, which record date shall be at the close of business on the day the
Institutional Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons, shall be entitled to join
in such notice, whether or not such Holders remain Holders after such record
date; provided, that, unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day that is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice that has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 6.8.

          (f) Except as otherwise provided in this Section 6.8, the Holders of
not less than a Majority in liquidation amount of the Capital Securities may, on
behalf of the Holders of all the Capital Securities, waive any past default or
Event of Default and its consequences. Upon such waiver, any such default or
Event of Default shall cease to exist, and any default or Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default or impair any right consequent thereon.


                                      -36-



                                   ARTICLE VII
                      DISSOLUTION AND TERMINATION OF TRUST

     SECTION 7.1. Dissolution and Termination of Trust.

          (a) The Trust shall dissolve on the first to occur of

               (i) unless earlier dissolved, on March 15, 2042, the expiration
          of the term of the Trust;

               (ii) a Bankruptcy Event with respect to the Sponsor, the Trust or
          the Debenture Issuer;

               (iii) (other than in connection with a merger, consolidation or
          similar transaction not prohibited by the Indenture, this Declaration
          or the Guarantee, as the case may be) the filing of a certificate of
          dissolution or its equivalent with respect to the Sponsor or upon the
          revocation of the charter of the Sponsor and the expiration of 90 days
          after the date of revocation without a reinstatement thereof;

               (iv) the distribution of all of the Debentures to the Holders of
          the Securities, upon exercise of the right of the Holders of all of
          the outstanding Common Securities to dissolve the Trust as provided in
          Annex I hereto;

               (v) the entry of a decree of judicial dissolution of any Holder
          of the Common Securities, the Sponsor, the Trust or the Debenture
          Issuer;

               (vi) when all of the Securities shall have been called for
          redemption and the amounts necessary for redemption thereof shall have
          been paid to the Holders in accordance with the terms of the
          Securities; or

               (vii) before the issuance of any Securities, with the consent of
          all of the Trustees and the Sponsor.

          (b) As soon as is practicable after the occurrence of an event
referred to in Section 7.1(a), and after satisfaction of liabilities to
creditors of the Trust as required by applicable law, including Section 3808 of
the Statutory Trust Act, and subject to the terms set forth in Annex I, the
Delaware Trustee, when notified in writing of the completion of the winding up
of the Trust in accordance with the Statutory Trust Act, shall terminate the
Trust by filing, at the expense of the Sponsor, a certificate of cancellation
with the Secretary of State of the State of Delaware.

          (c) The provisions of Section 2.9 and Article IX shall survive the
termination of the Trust.


                                      -37-



                                  ARTICLE VIII
                              TRANSFER OF INTERESTS

     SECTION 8.1. General.

          (a) Subject to Section 6.4 and Section 8.1(c), when Capital Securities
are presented to the Registrar with a request to register a transfer or to
exchange them for an equal number of Capital Securities represented by different
Certificates, the Registrar shall register the transfer or make the exchange if
the requirements provided for herein for such transactions are met. To permit
registrations of transfers and exchanges, the Trust shall issue and the
Institutional Trustee shall authenticate Capital Securities at the Registrar's
request.

          (b) Upon issuance of the Common Securities, the Sponsor shall acquire
and retain beneficial and record ownership of the Common Securities and, for so
long as the Securities remain outstanding, the Sponsor shall maintain 100%
ownership of the Common Securities; provided, however, that any permitted
successor of the Sponsor under the Indenture that is a U.S. Person may succeed
to the Sponsor's ownership of the Common Securities.

          (c) Capital Securities may only be transferred, in whole or in part,
in accordance with the terms and conditions set forth in this Declaration and in
the terms of the Capital Securities. To the fullest extent permitted by
applicable law, any transfer or purported transfer of any Security not made in
accordance with this Declaration shall be null and void and will be deemed to be
of no legal effect whatsoever and any such transferee shall be deemed not to be
the holder of such Capital Securities for any purpose, including but not limited
to the receipt of Distributions on such Capital Securities, and such transferee
shall be deemed to have no interest whatsoever in such Capital Securities.

          (d) The Registrar shall provide for the registration of Securities and
of transfers of Securities, which will be effected without charge but only upon
payment (with such indemnity as the Registrar may require) in respect of any tax
or other governmental charges that may be imposed in relation to it. Upon
surrender for registration of transfer of any Securities, the Registrar shall
cause one or more new Securities to be issued in the name of the designated
transferee or transferees. Any Security issued upon any registration of transfer
or exchange pursuant to the terms of this Declaration shall evidence the same
Security and shall be entitled to the same benefits under this Declaration as
the Security surrendered upon such registration of transfer or exchange. Every
Security surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Security surrendered for registration of transfer shall be canceled by the
Institutional Trustee pursuant to Section 6.7. A transferee of a Security shall
be entitled to the rights and subject to the obligations of a Holder hereunder
upon the receipt by such transferee of a Security. By acceptance of a Security,
each transferee shall be deemed to have agreed to be bound by this Declaration.

          (e) Neither the Trust nor the Registrar shall be required (i) to
issue, register the transfer of, or exchange any Securities during a period
beginning at the opening of business 15 days before the day of any selection of
Securities for redemption and ending at the close of


                                      -38-



business on the earliest date on which the relevant notice of redemption is
deemed to have been given to all Holders of the Securities to be redeemed, or
(ii) to register the transfer or exchange of any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.

     SECTION 8.2. Transfer Procedures and Restrictions.

          (a) The Capital Securities shall bear the Restricted Securities Legend
(as defined below), which shall not be removed unless there is delivered to the
Trust such satisfactory evidence, which may include an opinion of counsel
reasonably acceptable to the Administrators and the Institutional Trustee, as
may be reasonably required by the Trust or the Institutional Trustee, that
neither the legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of the
Securities Act or that such Securities are not "restricted" within the meaning
of Rule 144 under the Securities Act. Upon provision of such satisfactory
evidence, the Institutional Trustee, at the written direction of the
Administrators, shall authenticate and deliver Capital Securities that do not
bear the Restricted Securities Legend (other than the legend contemplated by
Section 8.2(d)).

          (b) When Capital Securities are presented to the Registrar (x) to
register the transfer of such Capital Securities, or (y) to exchange such
Capital Securities for an equal number of Capital Securities represented by
different Certificates, the Registrar shall register the transfer or make the
exchange as requested if its reasonable requirements for such transaction are
met; provided, however, that the Capital Securities surrendered for registration
of transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Administrators,
the Institutional Trustee and the Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing.

          (c) Except as permitted by Section 8.2(a), each Capital Security shall
bear a legend (the "Restricted Securities Legend") in substantially the
following form:

     THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF
THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS CAPITAL SECURITY IS
EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
DECLARATION, AND NO TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF
THIS CAPITAL SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF
DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.

     UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC TO INDEPENDENT CAPITAL TRUST V OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF


                                      -39-



DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.

     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY
(A) TO THE DEBENTURE ISSUER OR THE TRUST, (B) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO A "NON
U.S. PERSON" IN AN "OFFSHORE TRANSACTION" PURSUANT TO REGULATION S UNDER THE
SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE DEBENTURE
ISSUER'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN
ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION OF TRUST, A COPY OF WHICH
MAY BE OBTAINED FROM THE DEBENTURE ISSUER OR THE TRUST. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.

     THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND
WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY
UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT OR AN
APPLICABLE EXEMPTION THEREFROM.

     THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT


                                      -40-



SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS
INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO
PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR
ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION
CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE
EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE
OR HOLDING. ANY PURCHASER OR HOLDER OF THIS SECURITY OR ANY INTEREST THEREIN
WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT
EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3)
OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE
OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY
OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO
FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH
THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

     IN CONNECTION WITH ANY TRANSFER, THE HOLDER OF THE CERTIFICATE WILL DELIVER
TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS
MAY BE REQUIRED BY THE AMENDED AND RESTATED DECLARATION OF TRUST TO CONFIRM THAT
THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

     THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A
LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS
THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A LIQUIDATION
AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT
WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER
OF THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO
HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.

          (d) Capital Securities may only be transferred in minimum blocks of
$100,000 aggregate liquidation amount (100 Capital Securities) and multiples of
$1,000 in excess thereof. Any attempted transfer of Capital Securities in a
block having an aggregate liquidation amount of less than $100,000 shall be
deemed to be void and of no legal effect whatsoever. Any such purported
transferee shall be deemed not to be a Holder of such Capital Securities for any
purpose, including, but not limited to, the receipt of Distributions on such
Capital Securities, and


                                      -41-



such purported transferee shall be deemed to have no interest whatsoever in such
Capital Securities.

          (e) Each party hereto understands and hereby agrees that the initial
purchaser is intended solely to be an interim holder of the Capital Securities
and is purchasing such securities to facilitate consummation of the transactions
contemplated herein and in the documents ancillary hereto. Notwithstanding any
provision in this Declaration to the contrary, the initial purchaser shall have
the right upon notice (a "Transfer Notice") to the Institutional Trustee and the
Sponsor to transfer title in and to the Capital Securities; provided such
transfer is exempt from registration under the Securities Act of 1933, as
amended, and rules promulgated thereunder. Any Transfer Notice delivered to the
Institutional Trustee and Sponsor pursuant to the preceding sentence shall
indicate the aggregate liquidation amount of Capital Securities being
transferred, the name and address of the transferee thereof (the "Transferee")
and the date of such transfer. Notwithstanding any provision in this Declaration
to the contrary, the transfer by the initial purchaser of title in and to the
Capital Securities pursuant to a Transfer Notice shall not be subject to any
requirement relating to Opinions of Counsel, Certificates of Transfer or any
other Opinion or Certificate applicable to transfers hereunder and relating to
Capital Securities.

          (f) Neither the Institutional Trustee nor the Registrar shall be
responsible for ascertaining whether any transfer hereunder complies with the
registration provisions of or any exemptions from the Securities Act, applicable
state securities laws or the applicable laws of any other jurisdiction, ERISA,
the Code or the Investment Company Act.

     SECTION 8.3. Deemed Security Holders.

     The Trust, the Administrators, the Trustees, the Paying Agent, the Transfer
Agent or the Registrar may treat the Person in whose name any Certificate shall
be registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trust, the
Administrators, the Trustees, the Paying Agent, the Transfer Agent or the
Registrar shall have actual or other notice thereof.

                                   ARTICLE IX
                       LIMITATION OF LIABILITY OF HOLDERS
                        OF SECURITIES, TRUSTEES OR OTHERS

     SECTION 9.1. Liability.

          (a) Except as expressly set forth in this Declaration, the Guarantee
and the terms of the Securities, the Sponsor shall not be:

               (i) personally liable for the return of any portion of the
          capital contributions (or any return thereon) of the Holders of the
          Securities which shall be made solely from assets of the Trust; and


                                      -42-



               (ii) required to pay to the Trust or to any Holder of the
          Securities any deficit upon dissolution of the Trust or otherwise.

          (b) The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Securities)
to the extent not satisfied out of the Trust's assets.

          (c) Except to the extent provided in Section 9.1(b), and pursuant to
Section 3803(a) of the Statutory Trust Act, the Holders of the Securities shall
be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware, except as otherwise specifically set
forth herein.

     SECTION 9.2. Exculpation.

          (a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person (other than an Administrator) shall be liable for any such
loss, damage or claim incurred by reason of such Indemnified Person's negligence
or willful misconduct or bad faith with respect to such acts or omissions and
except that an Administrator shall be liable for any such loss, damage or claim
incurred by reason of such Administrator's gross negligence or willful
misconduct or bad faith with respect to such acts or omissions.

          (b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and, if selected by such Indemnified Person, has been selected by
such Indemnified Person with reasonable care by or on behalf of the Trust,
including information, opinions, reports or statements as to the value and
amount of the assets, liabilities, profits, losses or any other facts pertinent
to the existence and amount of assets from which Distributions to Holders of
Securities might properly be paid.

          (c) It is expressly understood and agreed by the parties hereto that
insofar as any document, agreement or certificate is executed on behalf of the
Trust by any Trustee (i) such document, agreement or certificate is executed and
delivered by such Trustee, not in its individual capacity, but solely as Trustee
under this Declaration in the exercise of the powers and authority conferred and
vested in it, (ii) each of the representations, undertakings and agreements made
on the part of the Trust is made and intended not as representations,
warranties, covenants, undertakings and agreements by any Trustee in its
individual capacity, but is made and intended for the purpose of binding only
the Trust and (iii) under no circumstances shall any Trustee in its individual
capacity be personally liable for the payment of any indebtedness or expenses of
the Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under this
Declaration or any other document, agreement or certificate.


                                      -43-



     SECTION 9.3. Fiduciary Duty.

          (a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Institutional Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of the
Indemnified Person.

          (b) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:

               (i) in its "discretion" or under a grant of similar authority,
          the Indemnified Person shall be entitled to consider such interests
          and factors as it desires, including its own interests, and shall have
          no duty or obligation to give any consideration to any interest of or
          factors affecting the Trust or any other Person; or

               (ii) in its "good faith" or under another express standard, the
          Indemnified Person shall act under such express standard and shall not
          be subject to any other or different standard imposed by this
          Declaration or by applicable law.

     SECTION 9.4. Indemnification.

          (a) (i) The Sponsor shall indemnify, to the fullest extent permitted
          by law, any Indemnified Person who was or is a party or is threatened
          to be made a party to any threatened, pending or completed action,
          suit or proceeding, whether civil, criminal, administrative or
          investigative (other than an action by or in the right of the Trust)
          by reason of the fact that such Person is or was an Indemnified Person
          against expenses (including attorneys' fees and expenses), judgments,
          fines and amounts paid in settlement actually and reasonably incurred
          by such Person in connection with such action, suit or proceeding if
          such Person acted in good faith and in a manner such Person reasonably
          believed to be in or not opposed to the best interests of the Trust,
          and, with respect to any criminal action or proceeding, had no
          reasonable cause to believe such conduct was unlawful. The termination
          of any action, suit or proceeding by judgment, order, settlement,
          conviction, or upon a plea of nolo contendere or its equivalent, shall
          not, of itself, create a presumption that the Indemnified Person did
          not act in good faith and in a manner which such Person reasonably
          believed to be in or not opposed to the best interests of the Trust,
          and, with respect to any criminal action or proceeding, had reasonable
          cause to believe that such conduct was unlawful.

               (ii) The Sponsor shall indemnify, to the fullest extent permitted
          by law, any Indemnified Person who was or is a party or is threatened
          to be made a


                                      -44-



          party to any threatened, pending or completed action or suit by or in
          the right of the Trust to procure a judgment in its favor by reason of
          the fact that such Person is or was an Indemnified Person against
          expenses (including attorneys' fees and expenses) actually and
          reasonably incurred by such Person in connection with the defense or
          settlement of such action or suit if such Person acted in good faith
          and in a manner such Person reasonably believed to be in or not
          opposed to the best interests of the Trust and except that no such
          indemnification shall be made in respect of any claim, issue or matter
          as to which such Indemnified Person shall have been adjudged to be
          liable to the Trust, unless and only to the extent that the Court of
          Chancery of Delaware or the court in which such action or suit was
          brought shall determine upon application that, despite the
          adjudication of liability but in view of all the circumstances of the
          case, such Person is fairly and reasonably entitled to indemnity for
          such expenses which such Court of Chancery or such other court shall
          deem proper.

               (iii) To the extent that an Indemnified Person shall be
          successful on the merits or otherwise (including dismissal of an
          action without prejudice or the settlement of an action without
          admission of liability) in defense of any action, suit or proceeding
          referred to in paragraphs (i) and (ii) of this Section 9.4(a), or in
          defense of any claim, issue or matter therein, such Person shall be
          indemnified, to the fullest extent permitted by law, against expenses
          (including attorneys' fees and expenses) actually and reasonably
          incurred by such Person in connection therewith.

               (iv) Any indemnification of an Administrator under paragraphs (i)
          and (ii) of this Section 9.4(a) (unless ordered by a court) shall be
          made by the Sponsor only as authorized in the specific case upon a
          determination that indemnification of the Indemnified Person is proper
          in the circumstances because such Person has met the applicable
          standard of conduct set forth in paragraphs (i) and (ii). Such
          determination shall be made (A) by the Administrators by a majority
          vote of a Quorum consisting of such Administrators who were not
          parties to such action, suit or proceeding, (B) if such a Quorum is
          not obtainable, or, even if obtainable, if a Quorum of disinterested
          Administrators so directs, by independent legal counsel in a written
          opinion, or (C) by the Common Security Holder of the Trust.

               (v) To the fullest extent permitted by law, expenses (including
          attorneys' fees and expenses) incurred by an Indemnified Person in
          defending a civil, criminal, administrative or investigative action,
          suit or proceeding referred to in paragraphs (i) and (ii) of this
          Section 9.4(a) shall be paid by the Sponsor in advance of the final
          disposition of such action, suit or proceeding upon receipt of an
          undertaking by or on behalf of such Indemnified Person to repay such
          amount if it shall ultimately be determined that such Person is not
          entitled to be indemnified by the Sponsor as authorized in this
          Section 9.4(a). Notwithstanding the foregoing, no advance shall be
          made by the Sponsor if a determination is reasonably and promptly made
          (1) in the case of a Company Indemnified Person (A) by the
          Administrators by a majority vote of a Quorum of disinterested
          Administrators, (B) if such a Quorum is not obtainable, or, even if
          obtainable, if a


                                      -45-



          Quorum of disinterested Administrators so directs, by independent
          legal counsel in a written opinion or (C) by the Common Security
          Holder of the Trust, that, based upon the facts known to the
          Administrators, counsel or the Common Security Holder at the time such
          determination is made, such Indemnified Person acted in bad faith or
          in a manner that such Person either believed to be opposed to or did
          not believe to be in the best interests of the Trust, or, with respect
          to any criminal proceeding, that such Indemnified Person believed or
          had reasonable cause to believe such conduct was unlawful, or (2) in
          the case of a Fiduciary Indemnified Person, by independent legal
          counsel in a written opinion that, based upon the facts known to the
          counsel at the time such determination is made, such Indemnified
          Person acted in bad faith or in a manner that such Indemnified Person
          either believed to be opposed to or did not believe to be in the best
          interests of the Trust, or, with respect to any criminal proceeding,
          that such Indemnified Person believed or had reasonable cause to
          believe such conduct was unlawful. In no event shall any advance be
          made (i) to a Company Indemnified Person in instances where the
          Administrators, independent legal counsel or the Common Security
          Holder reasonably determine that such Person deliberately breached
          such Person's duty to the Trust or its Common or Capital Security
          Holders or (ii) to a Fiduciary Indemnified Person in instances where
          independent legal counsel promptly and reasonably determines in a
          written opinion that such Person deliberately breached such Person's
          duty to the Trust or its Common or Capital Security Holders.

          (b) The Sponsor shall indemnify, to the fullest extent permitted by
applicable law, each Indemnified Person from and against any and all loss,
damage, liability, tax (other than taxes based on the income of such Indemnified
Person), penalty, expense or claim of any kind or nature whatsoever incurred by
such Indemnified Person arising out of or in connection with or by reason of the
creation, administration or termination of the Trust, or any act or omission of
such Indemnified Person in good faith on behalf of the Trust and in a manner
such Indemnified Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by this Declaration, except that no
Indemnified Person shall be entitled to be indemnified in respect of any loss,
damage, liability, tax, penalty, expense or claim incurred by such Indemnified
Person by reason of negligence, willful misconduct or bad faith with respect to
such acts or omissions.

          (c) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 9.4 shall not be
deemed exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any agreement, vote of
stockholders or disinterested directors of the Sponsor or Capital Security
Holders of the Trust or otherwise, both as to action in such Person's official
capacity and as to action in another capacity while holding such office. All
rights to indemnification under this Section 9.4 shall be deemed to be provided
by a contract between the Sponsor and each Indemnified Person who serves in such
capacity at any time while this Section 9.4 is in effect. Any repeal or
modification of this Section 9.4 shall not affect any rights or obligations then
existing.


                                      -46-



          (d) The Sponsor or the Trust may purchase and maintain insurance on
behalf of any Person who is or was an Indemnified Person against any liability
asserted against such Person and incurred by such Person in any such capacity,
or arising out of such Person's status as such, whether or not the Sponsor would
have the power to indemnify such Person against such liability under the
provisions of this Section 9.4.

          (e) For purposes of this Section 9.4, references to "the Trust" shall
include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger, so that any Person who is or was a director, trustee, officer or
employee of such constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent of another
entity, shall stand in the same position under the provisions of this Section
9.4 with respect to the resulting or surviving entity as such Person would have
with respect to such constituent entity if its separate existence had continued.

          (f) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 9.4 shall, unless otherwise provided when
authorized or ratified, continue as to a Person who has ceased to be an
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a Person.

          (g) The provisions of this Section 9.4 shall survive the termination
of this Declaration or the earlier resignation or removal of the Institutional
Trustee. The obligations of the Sponsor under this Section 9.4 to compensate and
indemnify the Trustees and to pay or reimburse the Trustees for expenses,
disbursements and advances shall constitute additional indebtedness hereunder.
Such additional indebtedness shall be secured by a lien prior to that of the
Securities upon all property and funds held or collected by the Trustees as
such, except funds held in trust for the benefit of the holders of particular
Capital Securities, provided, that the Sponsor is the holder of the Common
Securities.

     SECTION 9.5. Outside Businesses. Any Covered Person, the Sponsor, the
Delaware Trustee and the Institutional Trustee (subject to Section 4.3(c)) may
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Trust, and the Trust and the Holders of Securities shall have no rights
by virtue of this Declaration in and to such independent ventures or the income
or profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. None of any Covered Person, the Sponsor, the Delaware Trustee or the
Institutional Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character that,
if presented to the Trust, could be taken by the Trust, and any Covered Person,
the Sponsor, the Delaware Trustee and the Institutional Trustee shall have the
right to take for its own account (individually or as a partner or fiduciary) or
to recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Institutional Trustee may engage or
be interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or
act on any committee or body of holders of, securities or other obligations of
the Sponsor or its Affiliates.


                                      -47-



     SECTION 9.6. Compensation; Fee.

          (a) Subject to the provisions set forth in the Fee Agreement between
the Institutional Trustee, Cohen & Company and the Company of even date
herewith, the Sponsor agrees:

               (i) to pay to the Trustees from time to time such compensation
          for all services rendered by them hereunder as the parties shall agree
          in writing from time to time (which compensation shall not be limited
          by any provision of law in regard to the compensation of a trustee of
          an express trust); and

               (ii) except as otherwise expressly provided herein, to reimburse
          the Trustees upon request for all reasonable, documented expenses,
          disbursements and advances incurred or made by the Trustees in
          accordance with any provision of this Declaration (including the
          reasonable compensation and the expenses and disbursements of their
          respective agents and counsel), except any such expense, disbursement
          or advance attributable to their negligence or willful misconduct.

          (b) The provisions of this Section 9.6 shall survive the dissolution
of the Trust and the termination of this Declaration and the removal or
resignation of any Trustee.

                                    ARTICLE X
                                   ACCOUNTING

     SECTION 10.1. Fiscal Year. The fiscal year (the "Fiscal Year") of the Trust
shall be the calendar year, or such other year as is required by the Code.

     SECTION 10.2. Certain Accounting Matters.

          (a) At all times during the existence of the Trust, the Administrators
shall keep, or cause to be kept at the principal office of the Trust in the
United States, as defined for purposes of Treasury Regulations Section
301.7701-7, full books of account, records and supporting documents, which shall
reflect in reasonable detail each transaction of the Trust. The books of account
shall be maintained on the accrual method of accounting, in accordance with
generally accepted accounting principles, consistently applied.

          (b) The Administrators shall either (i) cause each Form 10-K and Form
10-Q prepared by the Sponsor and filed with the Commission in accordance with
the Exchange Act to be delivered directly to each Holder of Securities, within
90 days after the filing of each Form 10-K and within 30 days after the filing
of each Form 10-Q or (ii) cause to be prepared at the principal office of the
Trust in the United States, as defined for purposes of Treasury Regulations
Section 301.7701-7, and delivered directly to each of the Holders of Securities,
within 90 days after the end of each Fiscal Year of the Trust, annual financial
statements of the Trust, including a balance sheet of the Trust as of the end of
such Fiscal Year, and the related statements of income or loss.

          (c) The Administrators shall cause to be duly prepared and delivered
to each of the Holders of Securities Form 1099 or such other annual United
States federal income tax information statement required by the Code, containing
such information with regard to the


                                      -48-



Securities held by each Holder as is required by the Code and the Treasury
Regulations. Notwithstanding any right under the Code to deliver any such
statement at a later date, the Administrators shall endeavor to deliver all such
statements within 30 days after the end of each Fiscal Year of the Trust.

          (d) The Administrators shall cause to be duly prepared in the United
States, as defined for purposes of Treasury Regulations Section 301.7701-7, and
filed an annual United States federal income tax return on a Form 1041 or such
other form required by United States federal income tax law, and any other
annual income tax returns required to be filed by the Administrators on behalf
of the Trust with any state or local taxing authority.

          (e) The Administrators will cause the Sponsor's regulatory reports to
be delivered to the Holder promptly following their filing with the Federal
Reserve.

     SECTION 10.3. Banking. The Trust shall maintain one or more bank accounts
in the United States, as defined for purposes of Treasury Regulations Section
301.7701-7, in the name and for the sole benefit of the Trust; provided,
however, that all payments of funds in respect of the Debentures held by the
Institutional Trustee shall be made directly to the Property Account and no
other funds of the Trust shall be deposited in the Property Account. The sole
signatories for such accounts (including the Property Account) shall be
designated by the Institutional Trustee.

     SECTION 10.4. Withholding. The Institutional Trustee or any Paying Agent
and the Administrators shall comply with all withholding requirements under
United States federal, state and local law. As a condition to the payment of any
principal of or interest on any Debt Security without the imposition of
withholding tax, the Institutional Trustee or any Paying Agent shall require the
previous delivery of properly completed and signed applicable U.S. federal
income tax certifications (generally, an Internal Revenue Service Form W-9 (or
applicable successor form) in the case of a person that is a "United States
person" within the meaning of Section 7701(a)(30) of the Code or an Internal
Revenue Service Form W-8 (or applicable successor form) in the case of a person
that is not a "United States person" within the meaning of Section 7701(a)(30)
of the Code) and any other certification acceptable to it to enable the
Institutional Trustee or any Paying Agent and the Trustee to determine their
respective duties and liabilities with respect to any taxes or other charges
that they may be required to pay, deduct or withhold in respect of such Debt
Security or the holder of such Debt Security under any present or future law or
regulation of the United States or any political subdivision thereof or taxing
authority therein or to comply with any reporting or other requirements under
any such law or regulation. The Administrators shall file required forms with
applicable jurisdictions and, unless an exemption from withholding is properly
established by a Holder, shall remit amounts withheld with respect to the Holder
to applicable jurisdictions. To the extent that the Institutional Trustee or any
Paying Agent is required to withhold and pay over any amounts to any authority
with respect to distributions or allocations to any Holder, the amount withheld
shall be deemed to be a Distribution to the Holder in the amount of the
withholding. In the event of any claimed overwithholding, Holders shall be
limited to an action against the applicable jurisdiction. If the amount required
to be withheld was not withheld from actual Distributions made, the
Institutional Trustee or any Paying Agent may reduce subsequent Distributions by
the amount of such withholding.


                                      -49-



                                   ARTICLE XI
                             AMENDMENTS AND MEETINGS

     SECTION 11.1. Amendments.

          (a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed by:

               (i) the Institutional Trustee,

               (ii) if the amendment affects the rights, powers, duties,
          obligations or immunities of the Delaware Trustee, the Delaware
          Trustee,

               (iii) if the amendment affects the rights, powers, duties,
          obligations or immunities of the Administrators, the Administrators,
          and

               (iv) the Holders of a Majority in liquidation amount of the
          Common Securities.

          (b) Notwithstanding any other provision of this Article XI, no
amendment shall be made, and any such purported amendment shall be void and
ineffective:

               (i) unless the Institutional Trustee shall have first received

                    (A) an Officers' Certificate from each of the Trust and the
               Sponsor that such amendment is permitted by, and conforms to, the
               terms of this Declaration (including the terms of the
               Securities); and

                    (B) an opinion of counsel (who may be counsel to the Sponsor
               or the Trust) that such amendment is permitted by, and conforms
               to, the terms of this Declaration (including the terms of the
               Securities) and that all conditions precedent to the execution
               and delivery of such amendment have been satisfied; or

               (ii) if the result of such amendment would be to

                    (A) cause the Trust to cease to be classified for purposes
               of United States federal income taxation as a grantor trust;

                    (B) reduce or otherwise adversely affect the powers of the
               Institutional Trustee in contravention of the Trust Indenture
               Act;

                    (C) cause the Trust to be deemed to be an Investment Company
               required to be registered under the Investment Company Act; or

                    (D) cause the Debenture Issuer to be unable to treat an
               amount equal to the Liquidation Amount of the Capital Securities
               as "Tier 1


                                      -50-



               Capital" for purposes of the capital adequacy guidelines of (x)
               the Federal Reserve (or, if the Debenture Issuer is not a bank
               holding company, such guidelines or policies applied to the
               Debenture Issuer as if the Debenture Issuer were subject to such
               guidelines of policies) or of (y) any other regulatory authority
               having jurisdiction over the Debenture Issuer.

          (c) Except as provided in Section 11.1(d), (e) or (g), no amendment
shall be made, and any such purported amendment shall be void and ineffective,
unless the Holders of a Majority in liquidation amount of the Capital Securities
shall have consented to such amendment.

          (d) In addition to and notwithstanding any other provision in this
Declaration, without the consent of each affected Holder, this Declaration may
not be amended to (i) change the amount or timing of any Distribution on the
Securities or any redemption or liquidation provisions applicable to the
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Securities as of a specified date or (ii) restrict
the right of a Holder to institute suit for the enforcement of any such payment
on or after such date.

          (e) Sections 9.1(b) and 9.1(c) and this Section 11.1 shall not be
amended without the consent of all of the Holders of the Securities.

          (f) The rights of the Holders of the Capital Securities and Common
Securities, as applicable, under Article IV to increase or decrease the number
of, and appoint and remove, Trustees shall not be amended without the consent of
the Holders of a Majority in liquidation amount of the Capital Securities or
Common Securities, as applicable.

          (g) Subject to Section 11.1(a), this Declaration may be amended by the
Institutional Trustee and the Holder of a Majority in liquidation amount of the
Common Securities without the consent of the Holders of the Capital Securities
to:

               (i) cure any ambiguity;

               (ii) correct or supplement any provision in this Declaration that
          may be defective or inconsistent with any other provision of this
          Declaration;

               (iii) add to the covenants, restrictions or obligations of the
          Sponsor; or

               (iv) modify, eliminate or add to any provision of this
          Declaration to such extent as may be necessary or desirable,
          including, without limitation, to ensure that the Trust will be
          classified for United States federal income tax purposes at all times
          as a grantor trust and will not be required to register as an
          Investment Company under the Investment Company Act (including without
          limitation to conform to any change in Rule 3a-5, Rule 3a-7 or any
          other applicable rule under the Investment Company Act or written
          change in interpretation or application thereof by any legislative
          body, court, government agency or regulatory authority) which
          amendment does not have a material adverse effect on the right,
          preferences or privileges of the Holders of Securities;


                                      -51-



provided, however, that no such modification, elimination or addition referred
to in clauses (i), (ii), (iii) or (iv) shall adversely affect the powers,
preferences or rights of Holders of Capital Securities.

     SECTION 11.2. Meetings of the Holders of the Securities; Action by Written
Consent.

          (a) Meetings of the Holders of any class of Securities may be called
at any time by the Administrators (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms of
the Securities or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading, if any. The Administrators shall
call a meeting of the Holders of such class if directed to do so by the Holders
of not less than 10% in liquidation amount of such class of Securities. Such
direction shall be given by delivering to the Administrators one or more notices
in a writing stating that the signing Holders of the Securities wish to call a
meeting and indicating the general or specific purpose for which the meeting is
to be called. Any Holders of the Securities calling a meeting shall specify in
writing the Certificates held by the Holders of the Securities exercising the
right to call a meeting and only those Securities represented by such
Certificates shall be counted for purposes of determining whether the required
percentage set forth in the second sentence of this paragraph has been met.

          (b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of the
Securities:

               (i) notice of any such meeting shall be given to all the Holders
          of the Securities having a right to vote thereat at least 7 days and
          not more than 60 days before the date of such meeting. Whenever a
          vote, consent or approval of the Holders of the Securities is
          permitted or required under this Declaration or the rules of any stock
          exchange on which the Capital Securities are listed or admitted for
          trading, if any, such vote, consent or approval may be given at a
          meeting of the Holders of the Securities. Any action that may be taken
          at a meeting of the Holders of the Securities may be taken without a
          meeting if a consent in writing setting forth the action so taken is
          signed by the Holders of the Securities owning not less than the
          minimum amount of Securities that would be necessary to authorize or
          take such action at a meeting at which all Holders of the Securities
          having a right to vote thereon were present and voting. Prompt notice
          of the taking of action without a meeting shall be given to the
          Holders of the Securities entitled to vote who have not consented in
          writing. The Administrators may specify that any written ballot
          submitted to the Holders of the Securities for the purpose of taking
          any action without a meeting shall be returned to the Trust within the
          time specified by the Administrators;

               (ii) each Holder of a Security may authorize any Person to act
          for it by proxy on all matters in which a Holder of Securities is
          entitled to participate, including waiving notice of any meeting, or
          voting or participating at a meeting. No proxy shall be valid after
          the expiration of 11 months from the date thereof unless otherwise
          provided in the proxy. Every proxy shall be revocable at the pleasure
          of the Holder of the Securities executing it. Except as otherwise
          provided


                                      -52-



          herein, all matters relating to the giving, voting or validity of
          proxies shall be governed by the General Corporation Law of the State
          of Delaware relating to proxies, and judicial interpretations
          thereunder, as if the Trust were a Delaware corporation and the
          Holders of the Securities were stockholders of a Delaware corporation;
          each meeting of the Holders of the Securities shall be conducted by
          the Administrators or by such other Person that the Administrators may
          designate; and

               (iii) unless the Statutory Trust Act, this Declaration, the terms
          of the Securities, the Trust Indenture Act or the listing rules of any
          stock exchange on which the Capital Securities are then listed for
          trading, if any, otherwise provides, the Administrators, in their sole
          discretion, shall establish all other provisions relating to meetings
          of Holders of Securities, including notice of the time, place or
          purpose of any meeting at which any matter is to be voted on by any
          Holders of the Securities, waiver of any such notice, action by
          consent without a meeting, the establishment of a record date, quorum
          requirements, voting in person or by proxy or any other matter with
          respect to the exercise of any such right to vote; provided, however,
          that each meeting shall be conducted in the United States (as that
          term is defined in Treasury Regulations Section 301.7701-7).

                                   ARTICLE XII
                    REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
                              AND DELAWARE TRUSTEE

     SECTION 12.1. Representations and Warranties of Institutional Trustee. The
Trustee that acts as initial Institutional Trustee represents and warrants to
the Trust and to the Sponsor at the date of this Declaration, and each Successor
Institutional Trustee represents and warrants to the Trust and the Sponsor at
the time of the Successor Institutional Trustee's acceptance of its appointment
as Institutional Trustee, that:

          (a) the Institutional Trustee is a banking corporation or national
association with trust powers, duly organized, validly existing and in good
standing under the laws of the State of New York or the United States of
America, respectively, with trust power and authority to execute and deliver,
and to carry out and perform its obligations under the terms of, this
Declaration;

          (b) the Institutional Trustee has a combined capital and surplus of at
least fifty million U.S. dollars ($50,000,000);

          (c) the Institutional Trustee is not an affiliate of the Sponsor, nor
does the Institutional Trustee offer or provide credit or credit enhancement to
the Trust;

          (d) the execution, delivery and performance by the Institutional
Trustee of this Declaration has been duly authorized by all necessary action on
the part of the Institutional Trustee. This Declaration has been duly executed
and delivered by the Institutional Trustee, and under Delaware law (excluding
any securities laws) constitutes a legal, valid and binding obligation of the
Institutional Trustee, enforceable against it in accordance with its terms,
subject


                                      -53-



to applicable bankruptcy, reorganization, moratorium, insolvency and other
similar laws affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether considered in a
proceeding in equity or at law);

          (e) the execution, delivery and performance of this Declaration by the
Institutional Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Institutional Trustee; and

          (f) no consent, approval or authorization of, or registration with or
notice to, any state or federal banking authority governing the trust powers of
the Institutional Trustee is required for the execution, delivery or performance
by the Institutional Trustee of this Declaration.

     SECTION 12.2. Representations and Warranties of Delaware Trustee. The
Trustee that acts as initial Delaware Trustee represents and warrants to the
Trust and to the Sponsor at the date of this Declaration, and each Successor
Delaware Trustee represents and warrants to the Trust and the Sponsor at the
time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee that:

          (a) if it is not a natural person, the Delaware Trustee is duly
organized, validly existing and has its principal place of business in the State
of Delaware;

          (b) if it is not a natural person, the execution, delivery and
performance by the Delaware Trustee of this Declaration has been duly authorized
by all necessary corporate action on the part of the Delaware Trustee. This
Declaration has been duly executed and delivered by the Delaware Trustee, and
under Delaware law (excluding any securities laws) constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether considered in a proceeding in equity or at law);

          (c) if it is not a natural person, the execution, delivery and
performance of this Declaration by the Delaware Trustee does not conflict with
or constitute a breach of the articles of association or by-laws of the Delaware
Trustee;

          (d) it has trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration;

          (e) no consent, approval or authorization of, or registration with or
notice to, any state or federal banking authority governing the trust powers of
the Delaware Trustee is required for the execution, delivery or performance by
the Delaware Trustee of this Declaration; and

          (f) if the Delaware Trustee is a natural person, he or she is a
resident of the State of Delaware.


                                      -54-



                                  ARTICLE XIII
                                  MISCELLANEOUS

     SECTION 13.1. Notices. All notices provided for in this Declaration shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied (which telecopy shall be followed by notice delivered or
mailed by first class mail) or mailed by first class mail, as follows:

          (a) if given to the Trust, in care of the Administrators at the
Trust's mailing address set forth below (or such other address as the Trust may
give notice of to the Holders of the Securities):

               Independent Capital Trust V
               c/o Independent Bank Corp.
               288 Union Street
               Rockland, Massachusetts 02370
               Attention: George Lamb
               Telecopy: (781) 982-6591
               Telephone: (781) 982-6879

          (b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as the Delaware Trustee may give notice of to the
Holders of the Securities):

               Christiana Bank & Trust Company
               1314 King Street
               Wilmington, Delaware 19801
               Attn: Corporate Trust Administration
               Telecopy: 302-421-9015
               Telephone: 302-888-7437

          (c) if given to the Institutional Trustee, at the Institutional
Trustee's mailing address set forth below (or such other address as the
Institutional Trustee may give notice of to the Holders of the Securities):

               LaSalle Bank National Association
               135 S. LaSalle Street, Suite 1511
               Chicago, Illinois 60603
               Attention: CDO Trust Services Group
               Independent Capital Trust V
               Telecopy: 312-904-0524
               Telephone: 312-904-0283

          (d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice of to the Trust):


                                      -55-



               Independent Bank Corp.
               288 Union Street
               Rockland, Massachusetts 02370
               Attention: George Lamb
               Telecopy: (781) 982-6591
               Telephone: (781) 982-6879

          (e) if given to any other Holder, at the address set forth on the
books and records of the Trust.

All such notices shall be deemed to have been given when received in person,
telecopied with receipt confirmed, or mailed by first class mail, postage
prepaid, except that if a notice or other document is refused delivery or cannot
be delivered because of a changed address of which no notice was given, such
notice or other document shall be deemed to have been delivered on the date of
such refusal or inability to deliver.

     SECTION 13.2. Governing Law. This Declaration and the rights and
obligations of the parties hereunder shall be governed by and interpreted in
accordance with the law of the State of Delaware and all rights, obligations and
remedies shall be governed by such laws without regard to the principles of
conflict of laws of the State of Delaware or any other jurisdiction that would
call for the application of the law of any jurisdiction other than the State of
Delaware.

     SECTION 13.3. Submission to Jurisdiction.

          (a) Each of the parties hereto agrees that any suit, action or
proceeding arising out of or based upon this Declaration, or the transactions
contemplated hereby, may be instituted in any of the courts of the State of New
York located in the Borough of Manhattan, City and State of New York, and
further agrees to submit to the jurisdiction of Delaware, and to any actions
that are instituted in state or Federal court in Wilmington, Delaware and any
competent court in the place of its corporate domicile in respect of actions
brought against it as a defendant. In addition, each such party irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of such suit, action or proceeding
brought in any such court and irrevocably waives any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum and irrevocably waives any right to which it may be entitled
on account of its place of corporate domicile. Each such party hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or relating to this Declaration or the transactions contemplated
hereby. Each such party agrees that final judgment in any proceedings brought in
such a court shall be conclusive and binding upon it and may be enforced in any
court to the jurisdiction of which it is subject by a suit upon such judgment.

          (b) Each of the Sponsor, the Trustees, the Administrators and the
Holder of the Common Securities irrevocably consents to the service of process
on it in any such suit, action or proceeding by the mailing thereof by
registered or certified mail, postage prepaid, to it at its address given in or
pursuant to Section 13.1 hereof.


                                      -56-



          (c) To the extent permitted by law, nothing herein contained shall
preclude any party from effecting service of process in any lawful manner or
from bringing any suit, action or proceeding in respect of this Declaration in
any other state, country or place.

     SECTION 13.4. Intention of the Parties. It is the intention of the parties
hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Declaration shall be
interpreted to further this intention of the parties.

     SECTION 13.5. Headings. Headings contained in this Declaration are inserted
for convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.

     SECTION 13.6. Successors and Assigns. Whenever in this Declaration any of
the parties hereto is named or referred to, the successors and assigns of such
party shall be deemed to be included, and all covenants and agreements in this
Declaration by the Sponsor and the Trustees shall bind and inure to the benefit
of their respective successors and assigns, whether or not so expressed.

     SECTION 13.7. Partial Enforceability. If any provision of this Declaration,
or the application of such provision to any Person or circumstance, shall be
held invalid, the remainder of this Declaration, or the application of such
provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.

     SECTION 13.8. Counterparts. This Declaration may contain more than one
counterpart of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Trustees and Administrators to any of
such counterpart signature pages. All of such counterpart signature pages shall
be read as though one, and they shall have the same force and effect as though
all of the signers had signed a single signature page.


                                      -57-



     IN WITNESS WHEREOF, the undersigned have caused this Declaration to be duly
executed as of the day and year first above written.

                                        CHRISTIANA BANK & TRUST COMPANY,
                                        as Delaware Trustee


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        LASALLE BANK NATIONAL
                                        ASSOCIATION, as
                                        Institutional Trustee


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        INDEPENDENT BANK CORP.,
                                        as Sponsor


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        INDEPENDENT CAPITAL TRUST V


                                        By:
                                            ------------------------------------
                                        Name: Denis Sheahan
                                        Administrator


                                        By:
                                            ------------------------------------
                                        Name: Edward Seksay
                                        Administrator

(9) Independent Bank Corp.


                                      -58-



                                     ANNEX I

                                    TERMS OF
                             CAPITAL SECURITIES AND
                                COMMON SECURITIES

     Pursuant to Section 6.1 of the Amended and Restated Declaration of Trust,
dated as of December 28, 2006 (as amended from time to time, the "Declaration"),
the designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Capital Securities and the Common Securities are set out
below (each capitalized term used but not defined herein has the meaning set
forth in the Declaration):

     1. Designation and Number.

     (a) Capital Securities. 50,000 Capital Securities of Independent Capital
Trust V (the "Trust"), with an aggregate stated liquidation amount with respect
to the assets of the Trust of Fifty Million Dollars ($50,000,000) and a stated
liquidation amount with respect to the assets of the Trust of $1,000 per Capital
Security, are hereby designated for the purposes of identification only as the
"TP Securities" (the "Capital Securities"). The Capital Security Certificates
evidencing the Capital Securities shall be substantially in the form of Exhibit
A-1 to the Declaration, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or practice or to conform
to the rules of any stock exchange on which the Capital Securities are listed,
if any.

     (b) Common Securities. 1,547 Common Securities of the Trust (the "Common
Securities") will be evidenced by Common Security Certificates substantially in
the form of Exhibit A-2 to the Declaration, with such changes and additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice. The Common Securities will have an aggregate stated liquidation amount
with respect to the assets of the Trust of One Million Five Hundred Forty Seven
Thousand Dollars ($1,547,000) and a stated liquidation amount with respect to
the assets of the Trust of $1,000 per Common Security.

     2. Distributions.

     (a) Distributions payable on each Security will be payable at a variable
per annum rate of interest, reset quarterly, equal to LIBOR, as determined on
the LIBOR Determination Date for such Distribution Payment Period, plus 1.48%
(the "Coupon Rate") of the stated liquidation amount of $1,000 per Security
(provided, however, that the Coupon Rate for any Distribution Payment Period may
not exceed the highest rate permitted by New York law, as the same may be
modified by United States law of general applicability), such Coupon Rate being
the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Except as set forth below in respect of an Extension Period,
Distributions in arrears for more than one quarterly period will bear interest
thereon compounded quarterly at the applicable Coupon Rate for each such
quarterly period (to the extent permitted by applicable law). The term
"Distributions" as used herein includes cash distributions, any such compounded
distributions and any Additional Interest payable on the Debentures unless
otherwise stated. A Distribution is payable only to the extent that payments are
made in respect of the Debentures held by the


                                     A-I-1



Institutional Trustee and to the extent the Institutional Trustee has funds
legally available in the Property Account therefor. The amount of Distributions
payable for any Distribution Payment Period will be computed for any full
quarterly Distribution Payment Period on the basis of a 360-day year and the
actual number of days elapsed in the relevant Distribution period; provided,
however, that upon the occurrence of a Special Event redemption pursuant to
paragraph 4(a) below the amounts payable pursuant to this Declaration shall be
calculated as set forth in the definition of Special Redemption Price.

     (b) LIBOR shall be determined by the Calculation Agent in accordance with
the following provisions:

               (1) On the second LIBOR Business Day (provided, that on such day
          commercial banks are open for business (including dealings in foreign
          currency deposits) in London (a "LIBOR Banking Day"), and otherwise
          the next preceding LIBOR Business Day that is also a LIBOR Banking
          Day) prior to March 15, June 15, September 15 and December 15 (or,
          with respect to the first Distribution Payment Period, on December 22,
          2006), (each such day, a "LIBOR Determination Date") for such
          Distribution Payment Period), the Calculation Agent shall obtain the
          rate for three-month U.S. Dollar deposits in Europe, which appears on
          Telerate Page 3750 (as defined in the International Swaps and
          Derivatives Association, Inc. 2000 Interest Rate and Currency Exchange
          Definitions) or such other page as may replace such Telerate Page 3750
          on the Moneyline Telerate, Inc. service (or such other service or
          services as may be nominated by the British Banker's Association as
          the information vendor for the purpose of displaying London interbank
          offered rates for U.S. dollar deposits), as of 11:00 a.m. (London
          time) on such LIBOR Determination Date, and the rate so obtained shall
          be LIBOR for such Distribution Payment Period. "LIBOR Business Day"
          means any day that is not a Saturday, Sunday or other day on which
          commercial banking institutions in The City of New York or Chicago,
          Illinois are authorized or obligated by law or executive order to be
          closed. If such rate is superseded on Telerate Page 3750 by a
          corrected rate before 12:00 noon (London time) on the same LIBOR
          Determination Date, the corrected rate as so substituted will be the
          applicable LIBOR for that Distribution Payment Period.

               (2) If, on any LIBOR Determination Date, such rate does not
          appear on Telerate Page 3750 or such other page as may replace such
          Telerate Page 3750 on the Moneyline Telerate, Inc. service (or such
          other service or services as may be nominated by the British Banker's
          Association as the information vendor for the purpose of displaying
          London interbank offered rates for U.S. dollar deposits), the
          Calculation Agent shall determine the arithmetic mean of the offered
          quotations of the Reference Banks (as defined below) to leading banks
          in the London Interbank market for three-month U.S. Dollar deposits in
          Europe (in an amount determined by the Calculation Agent) by reference
          to requests for quotations as of approximately 11:00 a.m. (London
          time) on the LIBOR Determination Date made by the Calculation Agent to
          the Reference Banks. If, on any LIBOR Determination Date, at least two
          of the Reference Banks provide such quotations, LIBOR shall equal the
          arithmetic mean of such quotations. If, on any


                                     A-I-2



          LIBOR Determination Date, only one or none of the Reference Banks
          provide such a quotation, LIBOR shall be deemed to be the arithmetic
          mean of the offered quotations that at least two leading banks in the
          City of New York (as selected by the Calculation Agent) are quoting on
          the relevant LIBOR Determination Date for three-month U.S. Dollar
          deposits in Europe at approximately 11:00 a.m. (London time) (in an
          amount determined by the Calculation Agent). As used herein,
          "Reference Banks" means four major banks in the London Interbank
          market selected by the Calculation Agent.

               (3) If the Calculation Agent is required but is unable to
          determine a rate in accordance with at least one of the procedures
          provided above, LIBOR for the applicable Distribution Payment Period
          shall be LIBOR in effect for the immediately preceding Distribution
          Payment Period.

     (c) All percentages resulting from any calculations on the Securities will
be rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and all
dollar amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward).

     (d) As soon as practicable following each LIBOR Determination Date, but in
no event later than the 30th day following such LIBOR Determination Date, the
Calculation Agent shall notify, in writing, the Sponsor and the Paying Agent of
the applicable Coupon Rate in effect for the related Distribution Payment
Period. The Calculation Agent shall, upon the request of the Holder of any
Securities, provide the Coupon Rate then in effect. All calculations made by the
Calculation Agent in the absence of manifest error shall be conclusive for all
purposes and binding on the Sponsor and the Holders of the Securities. Any error
in a calculation of the Coupon Rate by the Calculation Agent may be corrected at
any time by the delivery of notice of such corrected Coupon Rate as provided
above. The Paying Agent shall be entitled to rely on information received from
the Calculation Agent or the Sponsor as to the Coupon Rate. The Sponsor shall,
from time to time, provide any necessary information to the Paying Agent
relating to any original issue discount and interest on the Securities that is
included in any payment and reportable for taxable income calculation purposes.
Failure to notify the Sponsor, the Institutional Trustee or the Paying Agent of
the applicable Coupon Rate shall not affect the obligation of the Sponsor to
make payment on the Debentures at such Coupon Rate.

     (e) Distributions on the Securities will be cumulative, will accrue from
the date of original issuance, and will be payable, subject to extension of
Distribution payment periods as described herein, quarterly in arrears on March
15, June 15, September 15 and December 15 of each year, commencing March 15,
2007 (each, a "Distribution Payment Date"). Subject to prior submission of
Notice (as defined in the Indenture), and so long as no Event of Default
pursuant to paragraphs (c), (e), (f) or (g) of Section 5.01 of the Indenture has
occurred and is continuing, the Debenture Issuer has the right under the
Indenture to defer payments of interest on the Debentures by extending the
interest distribution period for up to 20 consecutive quarterly periods (each,
an "Extension Period") at any time and from time to time on the Debentures,
subject to the conditions described below, during which Extension Period no
interest shall be due and payable (except any Additional Interest that may be
due and payable). During any Extension


                                     A-I-3


Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest (such accrued interest and interest thereon referred to herein
as "Deferred Interest") will accrue at an annual rate equal to the Coupon Rate
in effect for each such Extension Period, compounded quarterly from the date
such Deferred Interest would have been payable were it not for the Extension
Period, to the extent permitted by law. No Extension Period may end on a date
other than a Distribution Payment Date. At the end of any such Extension Period,
the Debenture Issuer shall pay all Deferred Interest then accrued and unpaid on
the Debentures; provided, however, that no Extension Period may extend beyond
the Maturity Date, Redemption Date (to the extent redeemed) or Special
Redemption Date; and provided, further, that, during any such Extension Period,
the Debenture Issuer may not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Debenture Issuer's capital stock or (ii) make any payment of
principal or premium or interest on or repay, repurchase or redeem any debt
securities of the Debenture Issuer that rank pari passu in all respects with or
junior in interest to the Debentures or (iii) make any payment under any
guarantees of the Debenture Issuer that rank in all respects pari passu with or
junior in interest to the Guarantee (other than (a) repurchases, redemptions or
other acquisitions of shares of capital stock of the Debenture Issuer (A) in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers,
directors or consultants, (B) in connection with a dividend reinvestment or
stockholder stock purchase plan or (C) in connection with the issuance of
capital stock of the Debenture Issuer (or securities convertible into or
exercisable for such capital stock), as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange, reclassification, combination or conversion of any class
or series of the Debenture Issuer's capital stock (or any capital stock of a
subsidiary of the Debenture Issuer) for any class or series of the Debenture
Issuer's capital stock or of any class or series of the Debenture Issuer's
indebtedness for any class or series of the Debenture Issuer's capital stock,
(c) the purchase of fractional interests in shares of the Debenture Issuer's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock. Prior to the termination of any Extension Period, the
Debenture Issuer may further extend such period; provided, that such period
together with all such previous and further consecutive extensions thereof shall
not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date,
Redemption Date (to the extent redeemed) or Special Redemption Date. Upon the
termination of any Extension Period and upon the payment of all Deferred
Interest, the Debenture Issuer may commence a new Extension Period, subject to
the foregoing requirements. No interest or Deferred Interest shall be due and
payable during an Extension Period, except at the end thereof, but Deferred
Interest shall accrue upon each installment of interest that would otherwise
have been due and payable during such Extension Period until such installment is
paid. If Distributions are deferred, the Distributions due shall be paid on the
date that the related Extension Period terminates to Holders of the Securities
as they appear on the books and records of the Trust on the record date
immediately preceding such date. Distributions on the Securities must be paid on
the dates payable (after giving effect to any Extension Period)


                                      A-I-4



to the extent that the Trust has funds legally available for the payment of such
distributions in the Property Account of the Trust. The Trust's funds available
for Distribution to the Holders of the Securities will be limited to payments
received from the Debenture Issuer. The payment of Distributions out of moneys
held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.

     (f) Distributions on the Securities will be payable to the Holders thereof
as they appear on the books and records of the Registrar on the relevant record
dates. The relevant record dates shall be 15 days before the relevant
Distribution Payment Date. Distributions payable on any Securities that are not
punctually paid on any Distribution Payment Date, as a result of the Debenture
Issuer having failed to make a payment under the Debentures, as the case may be,
when due (taking into account any Extension Period), will cease to be payable to
the Person in whose name such Securities are registered on the relevant record
date, and such defaulted Distribution will instead be payable to the Person in
whose name such Securities are registered on the special record date or other
specified date determined in accordance with the Indenture. Notwithstanding
anything to the contrary contained herein, if any Distribution Payment Date,
other than on the Maturity Date, any Redemption Date or the Special Redemption
Date, falls on a day that is not a Business Day, then any Distributions payable
will be paid on, and such Distribution Payment Date will be moved to, the next
succeeding Business Day, and no additional Distributions will accrue for each
day that such payment is delayed as a result thereof. If the Maturity Date,
Redemption Date or Special Redemption Date falls on a day that is not a Business
Day, then the principal, premium, if any, and/or interest payable on such date
will be paid on the next succeeding Business Day, and no additional interest
will accrue (except that, if such Business Day falls in the next calendar year,
such payment will be made on the immediately preceding Business Day).

     (g) In the event that there is any money or other property held by or for
the Trust that is not accounted for hereunder, such property shall be
distributed pro rata (as defined herein) among the Holders of the Securities.

     3. Liquidation Distribution Upon Dissolution. In the event of the voluntary
or involuntary liquidation, dissolution, winding-up or termination of the Trust
(each, a "Liquidation") other than in connection with a redemption of the
Debentures, the Holders of the Securities will be entitled to receive out of the
assets of the Trust available for distribution to Holders of the Securities,
after satisfaction of liabilities to creditors of the Trust (to the extent not
satisfied by the Debenture Issuer), distributions equal to the aggregate of the
stated liquidation amount of $1,000 per Security plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"), unless in connection with such Liquidation, the Debentures in an
aggregate stated principal amount equal to the aggregate stated liquidation
amount of such Securities, with an interest rate equal to the Coupon Rate of,
and bearing accrued and unpaid interest in an amount equal to the accrued and
unpaid Distributions on, and having the same record date as, such Securities,
after paying or making reasonable provision to pay all claims and obligations of
the Trust in accordance with Section 3808(e) of the Statutory Trust Act, shall
be distributed on a Pro Rata basis to the Holders of the Securities in exchange
for such Securities.


                                      A-I-5



     The Sponsor, as the Holder of all of the Common Securities, has the right
at any time to, upon receipt of an opinion of nationally recognized tax counsel
that Holders will not recognize any gain or loss for United States federal
income tax purposes as a result of the distribution Debentures, dissolve the
Trust (including without limitation upon the occurrence of a Tax Event, an
Investment Company Event or a Capital Treatment Event), subject to the receipt
by the Debenture Issuer of prior approval from any regulatory authority having
jurisdiction over the Sponsor that is primarily responsible for regulating the
activities of the Sponsor if such approval is then required under applicable
capital guidelines or policies of such regulatory authority, and, after
satisfaction of liabilities to creditors of the Trust, cause the Debentures to
be distributed to the Holders of the Securities on a Pro Rata basis in
accordance with the aggregate stated liquidation amount thereof.

     The Trust shall dissolve on the first to occur of (i) March 15, 2042, the
expiration of the term of the Trust, (ii) a Bankruptcy Event with respect to the
Sponsor, the Trust or the Debenture Issuer, (iii) (other than in connection with
a merger, consolidation or similar transaction not prohibited by the Indenture,
this Declaration or the Guarantee, as the case may be) the filing of a
certificate of dissolution or its equivalent with respect to the Sponsor or upon
the revocation of the charter of the Sponsor and the expiration of 90 days after
the date of revocation without a reinstatement thereof, (iv) the distribution to
the Holders of the Securities of the Debentures, upon exercise of the right of
the Holder of all of the outstanding Common Securities to dissolve the Trust as
described above, (v) the entry of a decree of a judicial dissolution of the
Sponsor or the Trust, or (vi) when all of the Securities shall have been called
for redemption and the amounts necessary for redemption thereof shall have been
paid to the Holders in accordance with the terms of the Securities. As soon as
practicable after the dissolution of the Trust and upon completion of the
winding up of the Trust, the Trust shall terminate upon the filing of a
certificate of cancellation with the Secretary of State of the State of
Delaware.

     If a Liquidation of the Trust occurs as described in clause (i), (ii),
(iii) or (v) in the immediately preceding paragraph, the Trust shall be
liquidated by the Institutional Trustee of the Trust as expeditiously as such
Trustee determines to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, to the
Holders of the Securities, the Debentures on a Pro Rata basis to the extent not
satisfied by the Debenture Issuer, unless such distribution is determined by the
Institutional Trustee not to be practical, in which event such Holders will be
entitled to receive out of the assets of the Trust available for distribution to
the Holders, after satisfaction of liabilities to creditors of the Trust to the
extent not satisfied by the Debenture Issuer, an amount equal to the Liquidation
Distribution. An early Liquidation of the Trust pursuant to clause (iv) of the
immediately preceding paragraph shall occur if the Institutional Trustee
determines that such Liquidation is possible by distributing, after satisfaction
of liabilities to creditors of Trust, to the Holders of the Securities on a Pro
Rata basis, the Debentures, and such distribution occurs.

     If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on such Capital Securities shall be paid to the Holders of the Securities
on a Pro Rata basis, except that if an Event of Default has occurred and is
continuing, the Capital Securities shall have a preference over the Common
Securities with regard to such distributions.


                                      A-I-6



     Upon any such Liquidation of the Trust involving a distribution of the
Debentures, if at the time of such Liquidation, the Capital Securities were
rated by at least one nationally-recognized statistical rating organization, the
Debenture Issuer will use its reasonable best efforts to obtain from at least
one such or other rating organization a rating for the Debentures.

     After the date for any distribution of the Debentures upon dissolution of
the Trust, (i) the Securities of the Trust will be deemed to be no longer
outstanding, (ii) any certificates representing the Capital Securities will be
deemed to represent undivided beneficial interests in such of the Debentures as
have an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
bearing accrued and unpaid interest equal to accrued and unpaid distributions
on, the Securities until such certificates are presented to the Debenture Issuer
or its agent for transfer or reissuance (and until such certificates are so
surrendered, no payments of interest or principal shall be made to Holders of
Securities in respect of any payments due and payable under the Debentures) and
(iii) all rights of Holders of Securities under the Capital Securities or the
Common Securities, as applicable, shall cease, except the right of such Holders
to receive Debentures upon surrender of certificates representing such
Securities.

     4. Redemption and Distribution.

     (a) The Debentures will mature on March 15, 2037. The Debentures may be
redeemed by the Debenture Issuer, in whole or in part, on any March 15, June 15,
September 15 or December 15 on or after March 15, 2012 at the Redemption Price,
upon not less than 30 nor more than 60 days' notice to Holders of such
Debentures. In addition, upon the occurrence and continuation of a Tax Event, an
Investment Company Event or a Capital Treatment Event, the Debentures may be
redeemed by the Debenture Issuer in whole or in part, at any time within 90 days
following the occurrence of such Tax Event, Investment Company Event or Capital
Treatment Event, as the case may be (the "Special Redemption Date"), at the
Special Redemption Price, upon not less than 30 nor more than 60 days' notice to
Holders of the Debentures so long as such Tax Event, Investment Company Event or
Capital Treatment Event, as the case may be, is continuing. In each case, the
right of the Debenture Issuer to redeem the Debentures is subject to the
Debenture Issuer having received prior approval from any regulatory authority
having jurisdiction over the Debenture Issuer, if such approval is then required
under applicable capital guidelines or policies of such regulatory authority.

     "Tax Event" means the receipt by the Debenture Issuer and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to or change (including any announced prospective change) in
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement (including any private letter ruling,
technical advice memorandum, regulatory procedure, notice or announcement) (an
"Administrative Action") or judicial decision interpreting or applying such laws
or regulations, regardless of whether such Administrative Action or judicial
decision is issued to or in connection with a proceeding involving the Debenture
Issuer or the Trust and whether or not subject to review or appeal, which
amendment, clarification, change, Administrative Action or decision is enacted,
promulgated or announced, in each case on or after the date of original issuance
of the Debentures, there is more than an insubstantial risk that: (i) the Trust
is, or will be within 90 days


                                      A-I-7



of the date of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Debentures; (ii) if the Debenture
Issuer is organized and existing under the laws of the United States or any
state thereof or the District of Columbia, interest payable by the Debenture
Issuer on the Debentures is not, or within 90 days of the date of such opinion,
will not be, deductible by the Debenture Issuer, in whole or in part, for United
States federal income tax purposes; or (iii) the Trust is, or will be within 90
days of the date of such opinion, subject to more than a de minimis amount of
other taxes (including withholding taxes), duties, assessments or other
governmental charges.

     "Investment Company Event" means the receipt by the Debenture Issuer and
the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of a change in law or regulation or written change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, there is more than an
insubstantial risk that the Trust is or, within 90 days of the date of such
opinion will be, considered an "investment company" that is required to be
registered under the Investment Company Act, which change or prospective change
becomes effective or would become effective, as the case may be, on or after the
date of the original issuance of the Debentures.

     "Capital Treatment Event" means, if the Debenture Issuer is organized and
existing under the laws of the United States or any state thereof or the
District of Columbia, the receipt by the Debenture Issuer and the Trust of an
Opinion of Counsel experienced in such matters to the effect that, as a result
of (a) any amendment to, or change in, the laws, rules or regulations of the
United States or any political subdivision thereof or therein, or any rules,
guidelines or policies of any applicable regulatory authority for the Debenture
Issuer or (b) any official or administrative pronouncement or action or decision
interpreting or applying such laws, rules or regulations, which amendment or
change is effective or which pronouncement, action or decision is announced on
or after the date of original issuance of the Debentures, there is more than an
insubstantial risk that, within 90 days of the receipt of such opinion, the
aggregate Liquidation Amount of the Capital Securities will not be eligible to
be treated by the Debenture Issuer as "Tier 1 Capital" (or the then equivalent
thereof) for purposes of the capital adequacy guidelines of the Federal Reserve
(or any successor regulatory authority with jurisdiction over bank or financial
holding companies), as then in effect and applicable to the Debenture Issuer (or
if the Debenture Issuer is not a bank holding company, such guidelines applied
to the Debenture Issuer as if the Debenture Issuer were subject to such
guidelines); provided, however, that the inability of the Debenture Issuer to
treat all or any portion of the aggregate Liquidation Amount of the Capital
Securities as Tier 1 Capital shall not constitute the basis for a Capital
Treatment Event, if such inability results from the Debenture Issuer having
cumulative preferred stock, minority interests in consolidated subsidiaries, or
any other class of security or interest which the Federal Reserve or OTS, as
applicable, may now or hereafter accord Tier 1 Capital treatment in excess of
the amount which may now or hereafter qualify for treatment as Tier 1 Capital
under applicable capital adequacy guidelines; provided further, however, that
the distribution of the Debentures in connection with the liquidation of the
Trust by the Debenture Issuer shall not in and of itself constitute a Capital
Treatment Event unless such liquidation shall have occurred in connection with a
Tax Event or an Investment Company Event.

     "Special Event" means any of a Capital Treatment Event, a Tax Event or an
Investment Company Event.


                                      A-I-8



     "Special Redemption Price" means, with respect to the redemption of any
Debentures following a Special Event, an amount in cash equal to 103.525% of the
principal amount of Debentures to be redeemed prior to March 15, 2008 and
thereafter equal to the percentage of the principal amount of the Debentures
that is specified below for the Special Redemption Date plus, in each case,
unpaid interest accrued thereon to the Special Redemption Date:



  Special Redemption During the
12-Month Period Beginning March 15   Percentage of Principal Amount
- ----------------------------------   ------------------------------
                                  
               2008                             103.140%
               2009                             102.355%
               2010                             101.570%
               2011                             100.785%
       2012 and thereafter                      100.000%


     "Redemption Date" means the date fixed for the redemption of Capital
Securities, which shall be any March 15, June 15, September 15 or December 15 on
or after March 15, 2012.

     "Redemption Price" means 100% of the principal amount of the Debentures
being redeemed plus accrued and unpaid interest on such Debentures to the
Redemption Date.

     (b) Upon the repayment in full at maturity or redemption in whole or in
part of the Debentures (other than following the distribution of the Debentures
to the Holders of the Securities), the proceeds from such repayment or payment
shall concurrently be applied to redeem Pro Rata at the applicable Redemption
Price, Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Debentures so repaid or redeemed; provided, however,
that holders of such Securities shall be given not less than 30 nor more than 60
days' notice of such redemption (other than at the scheduled maturity of the
Debentures).

     (c) If fewer than all the outstanding Securities are to be so redeemed, the
Common Securities and the Capital Securities will be redeemed Pro Rata and the
Capital Securities to be redeemed will be as described in Section 4(e)(ii)
below.

     (d) The Trust may not redeem fewer than all the outstanding Capital
Securities unless all accrued and unpaid Distributions have been paid on all
Capital Securities for all quarterly Distribution periods terminating on or
before the date of redemption.

     (e) Redemption or Distribution Procedures.

          (i) Notice of any redemption of, or notice of distribution of the
     Debentures in exchange for, the Securities (a "Redemption/Distribution
     Notice") will be given by the Trust by mail to each Holder of Securities to
     be redeemed or exchanged not fewer than 30 nor more than 60 days before the
     date fixed for redemption or exchange thereof which, in the case of a
     redemption, will be the date fixed for redemption of the Debentures. For
     purposes of the calculation of the date of redemption or exchange and the
     dates on which notices are given pursuant to this Section 4(e)(i), a
     Redemption/Distribution Notice shall be deemed to be


                                      A-I-9



     given on the day such notice is first mailed by first-class mail, postage
     prepaid, to Holders of such Securities. Each Redemption/Distribution Notice
     shall be addressed to the Holders of such Securities at the address of each
     such Holder appearing on the books and records of the Registrar. No defect
     in the Redemption/Distribution Notice or in the mailing thereof with
     respect to any Holder shall affect the validity of the redemption or
     exchange proceedings with respect to any other Holder.

          (ii) In the event that fewer than all the outstanding Securities are
     to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata
     from each Holder of Capital Securities.

          (iii) If the Securities are to be redeemed and the Trust gives a
     Redemption/Distribution Notice, which notice may only be issued if the
     Debentures are redeemed as set out in this Section 4 (which notice will be
     irrevocable), then, provided, that the Institutional Trustee has a
     sufficient amount of cash in connection with the related redemption or
     maturity of the Debentures, the Institutional Trustee will, with respect to
     Book-Entry Capital Securities, on the Redemption Date or Special Redemption
     Date, as applicable, irrevocably deposit with the Depositary for such
     Book-Entry Capital Securities, to the extent available therefor, funds
     sufficient to pay the relevant Redemption Price or Special Redemption
     Price, as applicable, and will give such Depositary irrevocable
     instructions and authority to pay the Redemption Price or Special
     Redemption Price, as applicable, to the Owners of the Capital Securities.
     With respect to Capital Securities that are not Book-Entry Capital
     Securities, the Institutional Trustee will pay, to the extent available
     therefor, the relevant Redemption Price or Special Redemption Price, as
     applicable, to the Holders of such Securities by check mailed to the
     address of each such Holder appearing on the books and records of the Trust
     on the redemption date. If a Redemption/Distribution Notice shall have been
     given and funds deposited as required, then immediately prior to the close
     of business on the date of such deposit, Distributions will cease to accrue
     on the Securities so called for redemption and all rights of Holders of
     such Securities so called for redemption will cease, except the right of
     the Holders of such Securities to receive the applicable Redemption Price
     or Special Redemption Price, as applicable, specified in Section 4(a). If
     any date fixed for redemption of Securities is not a Business Day, then
     payment of any such Redemption Price or Special Redemption Price, as
     applicable, payable on such date will be made on the next succeeding day
     that is a Business Day except that, if such Business Day falls in the next
     calendar year, such payment will be made on the immediately preceding
     Business Day, in each case with the same force and effect as if made on
     such date fixed for redemption. If payment of the Redemption Price or
     Special Redemption Price, as applicable, in respect of any Securities is
     improperly withheld or refused and not paid either by the Trust or by the
     Debenture Issuer as guarantor pursuant to the Guarantee, Distributions on
     such Securities will continue to accrue at the then applicable rate from
     the original redemption date to the actual date of payment, in which case
     the actual payment date will be considered the date fixed


                                     A-I-10



     for redemption for purposes of calculating the Redemption Price or Special
     Redemption Price, as applicable. In the event of any redemption of the
     Capital Securities issued by the Trust in part, the Trust shall not be
     required to (i) issue, register the transfer of or exchange any Security
     during a period beginning at the opening of business 15 days before any
     selection for redemption of the Capital Securities and ending at the close
     of business on the earliest date on which the relevant notice of redemption
     is deemed to have been given to all Holders of the Capital Securities to be
     so redeemed or (ii) register the transfer of or exchange any Capital
     Securities so selected for redemption, in whole or in part, except for the
     unredeemed portion of any Capital Securities being redeemed in part.

          (iv) Redemption/Distribution Notices shall be sent by the Trust (A) in
     respect of the Capital Securities, to the Holders thereof, and (B) in
     respect of the Common Securities, to the Holder thereof.

          (v) Subject to the foregoing and applicable law (including, without
     limitation, United States federal securities laws), and provided, that the
     acquiror is not the Holder of the Common Securities or the obligor under
     the Indenture, the Sponsor or any of its subsidiaries may at any time and
     from time to time purchase outstanding Capital Securities by tender, in the
     open market or by private agreement.

     5. Voting Rights - Capital Securities.

     (a) Except as provided under Sections 5(b) and 7 and as otherwise required
by law and the Declaration, the Holders of the Capital Securities will have no
voting rights. The Administrators are required to call a meeting of the Holders
of the Capital Securities if directed to do so by Holders of not less than 10%
in liquidation amount of the Capital Securities.

     (b) Subject to the requirements of obtaining a tax opinion by the
Institutional Trustee in certain circumstances set forth in the last sentence of
this paragraph, the Holders of a Majority in liquidation amount of the Capital
Securities, voting separately as a class, have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies
available under the Indenture as the holder of the Debentures, (ii) waive any
past default that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Debentures shall be
due and payable or (iv) consent on behalf of all the Holders of the Capital
Securities to any amendment, modification or termination of the Indenture or the
Debentures where such consent shall be required; provided, however, that, where
a consent or action under the Indenture would require the consent or act of the
holders of greater than a simple majority in principal amount of Debentures (a
"Super Majority") affected thereby, the Institutional Trustee may only give such
consent or take such action at the written direction of the Holders of not less
than the proportion in liquidation amount of the Capital Securities outstanding
which the relevant Super Majority represents of the aggregate principal amount
of the Debentures outstanding. If the Institutional Trustee fails to enforce its
rights under the Debentures after the Holders of a Majority or Super


                                     A-I-11



Majority, as the case may be, in liquidation amount of such Capital Securities
have so directed the Institutional Trustee, to the fullest extent permitted by
law, a Holder of the Capital Securities may institute a legal proceeding
directly against the Debenture Issuer to enforce the Institutional Trustee's
rights under the Debentures without first instituting any legal proceeding
against the Institutional Trustee or any other person or entity. Notwithstanding
the foregoing, if an Event of Default has occurred and is continuing and such
event is attributable to the failure of the Debenture Issuer to pay interest or
premium, if any, on or principal of the Debentures on the date such interest,
premium, if any, on or principal is payable (or in the case of redemption, the
redemption date), then a Holder of record of the Capital Securities may directly
institute a proceeding for enforcement of payment, on or after the respective
due dates specified in the Debentures, to such Holder directly of the principal
of or premium, if any, or interest on the Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of the Capital
Securities of such Holder. The Institutional Trustee shall notify all Holders of
the Capital Securities of any default actually known to the Institutional
Trustee with respect to the Debentures unless (x) such default has been cured
prior to the giving of such notice or (y) the Institutional Trustee determines
in good faith that the withholding of such notice is in the interest of the
Holders of such Capital Securities, except where the default relates to the
payment of principal of or interest on any of the Debentures. Such notice shall
state that such Indenture Event of Default also constitutes an Event of Default
hereunder. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy, the Institutional Trustee shall not take
any of the actions described in clause (i), (ii) or (iii) above unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such action, the Trust will not be classified as other than a
grantor trust for United States federal income tax purposes.

     In the event the consent of the Institutional Trustee, as the holder of the
Debentures is required under the Indenture with respect to any amendment,
modification or termination of the Indenture, the Institutional Trustee may
request the written direction of the Holders of the Securities with respect to
such amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a Majority in liquidation
amount of the Securities voting together as a single class; provided, however,
that where a consent under the Indenture would require the consent of a Super
Majority, the Institutional Trustee may only give such consent at the written
direction of the Holders of not less than the proportion in liquidation amount
of such Securities outstanding which the relevant Super Majority represents of
the aggregate principal amount of the Debentures outstanding. The Institutional
Trustee shall not take any such action in accordance with the written directions
of the Holders of the Securities unless the Institutional Trustee has obtained
an opinion of tax counsel to the effect that, as a result of such action, the
Trust will not be classified as other than a grantor trust for United States
federal income tax purposes.

     A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Event of Default hereunder. Any required approval or direction of
Holders of the Capital Securities may be given at a separate meeting of Holders
of the Capital Securities convened for such purpose, at a meeting of all of the
Holders of the Securities in the Trust or pursuant to written consent. The
Institutional Trustee will cause a notice of any meeting at which Holders of the
Capital Securities are entitled to vote, or of any matter upon which action by
written consent of such Holders is to be taken, to be mailed to each Holder of
record of the Capital Securities.


                                     A-I-12



Each such notice will include a statement setting forth the following
information (i) the date of such meeting or the date by which such action is to
be taken, (ii) a description of any resolution proposed for adoption at such
meeting on which such Holders are entitled to vote or of such matter upon which
written consent is sought and (iii) instructions for the delivery of proxies or
consents. No vote or consent of the Holders of the Capital Securities will be
required for the Trust to redeem and cancel Capital Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.

     Notwithstanding that Holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall
not entitle the Holder thereof to vote or consent and shall, for purposes of
such vote or consent, be treated as if such Capital Securities were not
outstanding.

     In no event will Holders of the Capital Securities have the right to vote
to appoint, remove or replace the Administrators, which voting rights are vested
exclusively in the Sponsor as the Holder of all of the Common Securities of the
Trust. Under certain circumstances as more fully described in the Declaration,
Holders of Capital Securities have the right to vote to appoint, remove or
replace the Institutional Trustee and the Delaware Trustee.

     6. Voting Rights - Common Securities.

     (a) Except as provided under Sections 6(b), 6(c) and 7 and as otherwise
required by law and the Declaration, the Common Securities will have no voting
rights.

     (b) The Holders of the Common Securities are entitled, in accordance with
Article IV of the Declaration, to vote to appoint, remove or replace any
Administrators.

     (c) Subject to Section 6.8 of the Declaration and only after each Event of
Default (if any) with respect to the Capital Securities has been cured, waived
or otherwise eliminated and subject to the requirements of the second to last
sentence of this paragraph, the Holders of a Majority in liquidation amount of
the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waiving any past default and its
consequences that are waivable under the Indenture, or (iii) exercising any
right to rescind or annul a declaration that the principal of all the Debentures
shall be due and payable, provided, however, that, where a consent or action
under the Indenture would require a Super Majority, the Institutional Trustee
may only give such consent or take such action at the written direction of the
Holders of not less than the proportion in liquidation amount of the Common
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding. Notwithstanding this Section
6(c), the Institutional Trustee shall not revoke any action previously
authorized or approved by a vote or consent of the Holders of the Capital
Securities. Other than with respect to directing the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee
or the Debenture Trustee as


                                     A-I-13



set forth above, the Institutional Trustee shall not take any action described
in clause (i), (ii) or (iii) above, unless the Institutional Trustee has
obtained an opinion of tax counsel to the effect that for the purposes of United
States federal income tax the Trust will not be classified as other than a
grantor trust on account of such action. If the Institutional Trustee fails to
enforce its rights under the Declaration, to the fullest extent permitted by law
any Holder of the Common Securities may institute a legal proceeding directly
against any Person to enforce the Institutional Trustee's rights under the
Declaration, without first instituting a legal proceeding against the
Institutional Trustee or any other Person.

     Any approval or direction of Holders of the Common Securities may be given
at a separate meeting of Holders of the Common Securities convened for such
purpose, at a meeting of all of the Holders of the Securities in the Trust or
pursuant to written consent. The Administrators will cause a notice of any
meeting at which Holders of the Common Securities are entitled to vote, or of
any matter upon which action by written consent of such Holders is to be taken,
to be mailed to each Holder of the Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.

     No vote or consent of the Holders of the Common Securities will be required
for the Trust to redeem and cancel Common Securities or to distribute the
Debentures in accordance with the Declaration and the terms of the Securities.

     7. Amendments to Declaration and Indenture.

     (a) In addition to any requirements under Section 11.1 of the Declaration,
if any proposed amendment to the Declaration provides for, or the Trustees
otherwise propose to effect, (i) any action that would adversely affect the
powers, preferences or special rights of the Securities, whether by way of
amendment to the Declaration or otherwise, or (ii) the Liquidation of the Trust,
other than as described in Section 7.1 of the Declaration, then the Holders of
outstanding Securities, voting together as a single class, will be entitled to
vote on such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of the Holders of not less than a Majority in
liquidation amount of the Securities affected thereby; provided, however, if any
amendment or proposal referred to in clause (i) above would adversely affect
only the Capital Securities or only the Common Securities, then only the
affected class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
Majority in liquidation amount of such class of Securities.

     (b) In the event the consent of the Institutional Trustee as the holder of
the Debentures is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification, or termination as directed by
a Majority in liquidation amount of the Securities voting together as a single
class; provided, however, that where a consent under the Indenture would require
a Super Majority, the


                                     A-I-14



Institutional Trustee may only give such consent at the written direction of the
Holders of not less than the proportion in liquidation amount of the Securities
which the relevant Super Majority represents of the aggregate principal amount
of the Debentures outstanding.

     (c) Notwithstanding the foregoing, no amendment or modification may be made
to the Declaration if such amendment or modification would (i) cause the Trust
to be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Institutional Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the Investment Company Act.

     (d) Notwithstanding any provision of the Declaration, the right of any
Holder of the Capital Securities to receive payment of distributions and other
payments upon redemption or otherwise, on or after their respective due dates,
or to institute a suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder. For the protection and enforcement of the foregoing provision, each and
every Holder of the Capital Securities shall be entitled to such relief as can
be given either at law or equity.

     8. Pro Rata. A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
of the Securities according to the aggregate liquidation amount of the
Securities held by the relevant Holder in relation to the aggregate liquidation
amount of all Securities outstanding unless, in relation to a payment, an Event
of Default has occurred and is continuing, in which case any funds available to
make such payment shall be paid first to each Holder of the Capital Securities
Pro Rata according to the aggregate liquidation amount of the Capital Securities
held by the relevant Holder relative to the aggregate liquidation amount of all
Capital Securities outstanding, and only after satisfaction of all amounts owed
to the Holders of the Capital Securities, to each Holder of the Common
Securities Pro Rata according to the aggregate liquidation amount of the Common
Securities held by the relevant Holder relative to the aggregate liquidation
amount of all Common Securities outstanding.

     9. Ranking. The Capital Securities rank pari passu with, and payment
thereon shall be made Pro Rata with, the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to receive payment of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights of the
Holders of the Capital Securities with the result that no payment of any
Distribution on, or Redemption Price or Special Redemption Price of, any Common
Security, and no other payment on account of redemption, liquidation or other
acquisition of Common Securities, shall be made unless payment in full in cash
of all accumulated and unpaid Distributions on all outstanding Capital
Securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price or Special Redemption Price the full
amount of such Redemption Price or the Special Redemption Price on all
outstanding Capital Securities then called for redemption, shall have been made
or provided for, and all funds immediately available to the Institutional
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or the Redemption Price or the Special Redemption Price of,
the Capital Securities then due and payable.


                                     A-I-15



     10. Acceptance of Guarantee and Indenture. Each Holder of the Capital
Securities and the Common Securities, by the acceptance of such Securities,
agrees to the provisions of the Guarantee, including the subordination
provisions therein and to the provisions of the Indenture.

     11. No Preemptive Rights. The Holders of the Securities shall have no, and
the issuance of the Securities is not subject to, preemptive or similar rights
to subscribe for any additional securities.

     12. Miscellaneous. These terms constitute a part of the Declaration. The
Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture
to a Holder without charge on written request to the Sponsor at its principal
place of business.


                                     A-I-16



                                   EXHIBIT A-1

                      FORM OF CAPITAL SECURITY CERTIFICATE

                           [FORM OF FACE OF SECURITY]

     THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF
THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS CAPITAL SECURITY IS
EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
DECLARATION, AND NO TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF
THIS CAPITAL SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF
DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.

     UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC TO INDEPENDENT CAPITAL TRUST V OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY
(A) TO THE DEBENTURE ISSUER OR THE TRUST, (B) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO A "NON
U.S. PERSON" IN AN "OFFSHORE TRANSACTION" PURSUANT TO REGULATION S UNDER THE
SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THE SECURITY FOR


                                      A-1-1



ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE DEBENTURE ISSUER'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM IN ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION OF TRUST, A
COPY OF WHICH MAY BE OBTAINED FROM THE DEBENTURE ISSUER OR THE TRUST. THE HOLDER
OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.

     THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND
WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY
UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT OR AN
APPLICABLE EXEMPTION THEREFROM.

     THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),
(EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY
REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN
ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,
95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND
HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION
4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR
HOLDER OF THIS SECURITY OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE
REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN
EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO
WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING
ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY
USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE,
OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION
406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE
STATUTORY OR ADMINISTRATIVE EXEMPTION.


                                      A-1-2



     IN CONNECTION WITH ANY TRANSFER, THE HOLDER OF THE CERTIFICATE WILL DELIVER
TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS
MAY BE REQUIRED BY THE AMENDED AND RESTATED DECLARATION OF TRUST TO CONFIRM THAT
THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

     THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A
LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS
THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A LIQUIDATION
AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT
WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER
OF THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO
HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.


                                      A-1-3



Certificate Number [P-001]                  Number of Capital Securities: 50,000

                          CUSIP No.____________________

                    Certificate Evidencing Capital Securities

                                       of

                           Independent Capital Trust V

                                  TP Securities

                (liquidation amount $1,000 per Capital Security)

     Independent Capital Trust V, a statutory trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that Cede & Co., as
nominee on behalf of the Depository Trust Company (the "Holder"), is the
registered owner of 50,000 capital securities of the Trust representing
undivided beneficial interests in the assets of the Trust, designated the TP
Securities (liquidation amount $1,000 per Capital Security) (the "Capital
Securities"). Subject to the Declaration (as defined below), the Capital
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this Certificate duly endorsed
and in proper form for transfer. The Capital Securities represented hereby are
issued pursuant to, and the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Capital Securities shall in
all respects be subject to, the provisions of the Amended and Restated
Declaration of Trust of the Trust, dated as of December 28, 2006, among Denis
Sheahan and Edward Seksay, as Administrators, Christiana Bank & Trust Company,
as Delaware Trustee, LaSalle Bank National Association, as Institutional
Trustee, Independent Bank Corp., as Sponsor, and the holders from time to time
of undivided beneficial interests in the assets of the Trust, including the
designation of the terms of the Capital Securities as set forth in Annex I to
the Declaration, as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Guarantee to the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Guarantee, and the Indenture to the Holder without charge
upon written request to the Sponsor at its principal place of business.

     By acceptance of this Security, the Holder is bound by the Declaration and
is entitled to the benefits thereunder.

     By acceptance of this Security, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of beneficial ownership in the Debentures.

     This Capital Security is governed by, and shall be construed in accordance
with, the laws of the State of Delaware, without regard to principles of
conflict of laws.


                                      A-1-4



     IN WITNESS WHEREOF, the Trust has duly executed this certificate.

                                     Independent Capital Trust V


                                     By:
                                         ---------------------------------------
                                     Name:
                                           -------------------------------------
                                     Title: Administrator

                                     Dated:
                                            ------------------------------------

                          CERTIFICATE OF AUTHENTICATION

     This represents Capital Securities referred to in the within-mentioned
Declaration.

                                     LASALLE BANK NATIONAL ASSOCIATION, not in
                                     its individual capacity but solely as
                                     Institutional Trustee


                                     By:
                                         ---------------------------------------
                                         Authorized Signatory

                                     Dated:
                                            ------------------------------------


                                      A-1-5



                          [FORM OF REVERSE OF SECURITY]

     Distributions payable on each Capital Security will be payable at a
variable per annum rate of interest, reset quarterly, equal to LIBOR (as defined
in the Declaration) plus 1.48% (the "Coupon Rate") of the stated liquidation
amount of $1,000 per Capital Security (provided, however, that the Coupon Rate
for any Distribution Payment Period may not exceed the highest rate permitted by
New York law, as the same may be modified by United States law of general
applicability), such Coupon Rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. Distributions in arrears for
more than one quarterly period will bear interest thereon compounded quarterly
at the then applicable Coupon Rate for each such quarterly period (to the extent
permitted by applicable law). The term "Distributions" as used herein includes
cash distributions, any such compounded distributions and any Additional
Interest payable on the Debentures unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds legally available in the Property Account therefor. The amount of
Distributions payable for any period shall be computed for any full quarterly
Distribution period on the basis of a 360-day year and the actual number of days
elapsed in the relevant Distribution Payment Period.

     Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year, commencing on March 15, 2007 (each, a "Distribution
Payment Date"). Subject to prior submission of Notice (as defined in the
Indenture), and so long as no Event of Default pursuant to paragraphs (c), (e),
(f) or (g) of Section 5.01 of the Indenture has occurred and is continuing, the
Debenture Issuer has the right under the Indenture to defer payments of interest
on the Debentures by extending the interest distribution period for up to 20
consecutive quarterly periods (each, an "Extension Period") at any time and from
time to time on the Debentures, subject to the conditions described below,
during which Extension Period no interest shall be due and payable (except any
Additional Interest that may be due and payable). During any Extension Period,
interest will continue to accrue on the Debentures, and interest on such accrued
interest (such accrued interest and interest thereon referred to herein as
"Deferred Interest") will accrue at an annual rate equal to the Coupon Rate in
effect for each such Extension Period, compounded quarterly from the date such
Deferred Interest would have been payable were it not for the Extension Period,
to the extent permitted by law. No Extension Period may end on a date other than
a Distribution Payment Date. At the end of any such Extension Period, the
Debenture Issuer shall pay all Deferred Interest then accrued and unpaid on the
Debentures; provided, however, that no Extension Period may extend beyond the
Maturity Date, Redemption Date (to the extent redeemed) or Special Redemption
Date. Prior to the termination of any Extension Period, the Debenture Issuer may
further extend such period; provided, that such period together with all such
previous and further consecutive extensions thereof shall not exceed 20
consecutive quarterly periods, or extend beyond the Maturity Date, Redemption
Date (to the extent redeemed) or Special Redemption Date. Upon the termination
of any Extension Period and upon the payment of all Deferred Interest, the
Debenture Issuer may commence a new Extension Period, subject to the foregoing
requirements. No interest or Deferred Interest (except any Additional Amounts
that may be due and payable) shall be due and payable during an Extension
Period, except at the end thereof, but Deferred Interest shall accrue upon each
installment of


                                      A-1-6



interest that would otherwise have been due and payable during such Extension
Period until such installment is paid. If Distributions are deferred, the
Distributions due shall be paid on the date that the related Extension Period
terminates to Holders of the Securities as they appear on the books and records
of the Trust on the record date immediately preceding such date. Distributions
on the Securities must be paid on the dates payable (after giving effect to any
Extension Period) to the extent that the Trust has funds legally available for
the payment of such distributions in the Property Account of the Trust. The
Trust's funds available for Distribution to the Holders of the Securities will
be limited to payments received from the Debenture Issuer. The payment of
Distributions out of moneys held by the Trust is guaranteed by the Guarantor
pursuant to the Guarantee.

     The Capital Securities shall be redeemable as provided in the Declaration.


                                      A-1-7



                                   ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital
Security Certificate to:

- ----------------------------------

- ----------------------------------

- ----------------------------------
(Insert assignee's social security or tax identification number)

- ----------------------------------

- ----------------------------------

- ----------------------------------
(Insert address and zip code of assignee),

and irrevocably appoints __________________________________________ as agent to
transfer this Capital Security Certificate on the books of the Trust. The agent
may substitute another to act for it, him or her.

Date:
      ----------------------------


Signature:
           -----------------------

     (Sign exactly as your name appears on the other side of this Capital
Security Certificate)


Signature Guarantee:(1)
                        -------------------

- ----------
(1)  Signature must be guaranteed by an "eligible guarantor institution" that is
     a bank, stockbroker, savings and loan association or credit union meeting
     the requirements of the Security registrar, which requirements include
     membership or participation in the Securities Transfer Agents Medallion
     Program ("STAMP") or such other "signature guarantee program" as may be
     determined by the Security registrar in addition to, or in substitution
     for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
     amended.


                                      A-1-8


                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

     THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.

     EXCEPT AS SET FORTH IN SECTION 8.1(b) OF THE DECLARATION (AS DEFINED
BELOW), THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED.


                                      A-2-1



Certificate Number [C-001]                    Number of Common Securities: 1,547

                    Certificate Evidencing Common Securities
                                       of
                           Independent Capital Trust V

     Independent Capital Trust V, a statutory trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that Independent Bank
Corp. (the "Holder") is the registered owner of 1,547 common securities of the
Trust representing undivided beneficial interests in the assets of the Trust
(liquidation amount $1,000 per Common Security) (the "Common Securities"). The
Common Securities represented hereby are issued pursuant to, and the
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities shall in all respects be subject to, the
provisions of the Amended and Restated Declaration of Trust of the Trust, dated
as of December 28, 2006, among Denis Sheahan and Edward Seksay, as
Administrators, Christiana Bank & Trust Company, as Delaware Trustee, LaSalle
Bank National Association, as Institutional Trustee, the Holder, as Sponsor, and
the holders from time to time of undivided beneficial interests in the assets of
the Trust, including the designation of the terms of the Common Securities as
set forth in Annex I to the Declaration, as the same may be amended from time to
time (the "Declaration"). Capitalized terms used herein but not defined shall
have the meaning given them in the Declaration. The Sponsor will provide a copy
of the Declaration and the Indenture to the Holder without charge upon written
request to the Sponsor at its principal place of business.

     As set forth in the Declaration, when an Event of Default has occurred and
is continuing, the rights of Holders of Common Securities to payment in respect
of Distributions and payments upon Liquidation, redemption or otherwise are
subordinated to the rights of payment of Holders of the Capital Securities.

     By acceptance of this Certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.

     By acceptance of this Certificate, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Common Securities as evidence of undivided beneficial ownership in the
Debentures.

     This Common Security is governed by, and shall be construed in accordance
with, the laws of the State of Delaware, without regard to principles of
conflict of laws.


                                      A-2-2



     IN WITNESS WHEREOF, the Trust has executed this certificate as of this
______ day of ____________________, 2006.

                                        Independent Capital Trust V


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title: Administrator


                                      A-2-3



                          [FORM OF REVERSE OF SECURITY]

     Distributions payable on each Common Security will be identical in amount
to the Distributions payable on each Capital Security, which is at a variable
per annum rate of interest, reset quarterly, equal to LIBOR (as defined in the
Declaration) plus 1.48% (the "Coupon Rate") of the stated liquidation amount of
$1,000 per Capital Security (provided, however, that the Coupon Rate for any
Distribution Payment Period may not exceed the highest rate permitted by New
York law, as the same may be modified by United States law of general
applicability), such Coupon Rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. Distributions in arrears for
more than one quarterly period will bear interest thereon compounded quarterly
at the then applicable Coupon Rate for each such quarterly period (to the extent
permitted by applicable law). The term "Distributions" as used herein includes
cash distributions, any such compounded distributions and any Additional
Interest payable on the Debentures unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds legally available in the Property Account therefor. The amount of
Distributions payable for any period shall be computed for any full quarterly
Distribution period on the basis of a 360-day year and the actual number of days
elapsed in the relevant Distribution Payment Period.

     Except as otherwise described below, Distributions on the Common Securities
will be cumulative, will accrue from the date of original issuance and will be
payable quarterly in arrears on March 15, June 15, September 15 and December 15
of each year, commencing on March 15, 2007 (each, a "Distribution Payment
Date"). Subject to prior submission of Notice (as defined in the Indenture), and
so long as no Event of Default pursuant to paragraphs (c), (e), (f) or (g) of
Section 5.01 of the Indenture has occurred and is continuing, the Debenture
Issuer has the right under the Indenture to defer payments of interest on the
Debentures by extending the interest distribution period for up to 20
consecutive quarterly periods (each, an "Extension Period") at any time and from
time to time on the Debentures, subject to the conditions described below,
during which Extension Period no interest shall be due and payable (except any
Additional Interest that may be due and payable). During any Extension Period,
interest will continue to accrue on the Debentures, and interest on such accrued
interest (such accrued interest and interest thereon referred to herein as
"Deferred Interest") will accrue at an annual rate equal to the Coupon Rate in
effect for each such Extension Period, compounded quarterly from the date such
Deferred Interest would have been payable were it not for the Extension Period,
to the extent permitted by law. No Extension Period may end on a date other than
a Distribution Payment Date. At the end of any such Extension Period, the
Debenture Issuer shall pay all Deferred Interest then accrued and unpaid on the
Debentures; provided, however, that no Extension Period may extend beyond the
Maturity Date, Redemption Date (to the extent redeemed) or Special Redemption
Date. Prior to the termination of any Extension Period, the Debenture Issuer may
further extend such period, provided, that such period together with all such
previous and further consecutive extensions thereof shall not exceed 20
consecutive quarterly periods, or extend beyond the Maturity Date, Redemption
Date (to the extent redeemed) or Special Redemption Date. Upon the termination
of any Extension Period and upon the payment of all Deferred Interest, the
Debenture Issuer may commence a new Extension Period, subject to the foregoing
requirements. No interest or Deferred Interest (except any Additional Interest
that may be due and payable) shall be due and payable during an Extension


                                      A-2-4



Period, except at the end thereof, but Deferred Interest shall accrue upon each
installment of interest that would otherwise have been due and payable during
such Extension Period until such installment is paid. If Distributions are
deferred, the Distributions due shall be paid on the date that the related
Extension Period terminates to Holders of the Securities as they appear on the
books and records of the Trust on the record date immediately preceding such
date.

     Distributions on the Securities must be paid on the dates payable (after
giving effect to any Extension Period) to the extent that the Trust has funds
legally available for the payment of such distributions in the Property Account
of the Trust. The Trust's funds legally available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.

     The Common Securities shall be redeemable as provided in the Declaration.


                                      A-2-5



                                   ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned assigns and transfers this Common
Security Certificate to:

_____________________________________

_____________________________________

_____________________________________
(Insert assignee's social security or tax identification number)

_____________________________________

_____________________________________

_____________________________________
(Insert address and zip code of assignee),

and irrevocably appoints ________ as agent to transfer this Common Security
Certificate on the books of the Trust. The agent may substitute another to act
for him or her.

Date:
      -------------------------------


Signature:
           --------------------------

     (Sign exactly as your name appears on the other side of this Common
Security Certificate)


Signature Guarantee:(1)
                        -------------

- ----------
(1)  Signature must be guaranteed by an "eligible guarantor institution" that is
     a bank, stockbroker, savings and loan association or credit union meeting
     the requirements of the Security registrar, which requirements include
     membership or participation in the Securities Transfer Agents Medallion
     Program ("STAMP") or such other "signature guarantee program" as may be
     determined by the Security registrar in addition to, or in substitution
     for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
     amended.


                                      A-2-6

EX-4.17

                                                                    Exhibit 4.17





                               GUARANTEE AGREEMENT

                             INDEPENDENT BANK CORP.

                          Dated as of December 28, 2006




(10) Independent Bank Corp.


                                TABLE OF CONTENTS



                                                                            PAGE
                                                                            ----
                                                                         
                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.1. Definitions and Interpretation .............................     1

                                   ARTICLE II
               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

SECTION 2.1. Powers and Duties of the Guarantee Trustee .................     4
SECTION 2.2. Certain Rights of the Guarantee Trustee ....................     5
SECTION 2.3. Not Responsible for Recitals or Issuance of Guarantee ......     7
SECTION 2.4. Events of Default; Waiver ..................................     7
SECTION 2.5. Events of Default; Notice ..................................     8

                                   ARTICLE III
                              THE GUARANTEE TRUSTEE

SECTION 3.1. The Guarantee Trustee; Eligibility .........................     8
SECTION 3.2. Appointment, Removal and Resignation of the Guarantee
             Trustee ....................................................     9

                                   ARTICLE IV
                                    GUARANTEE

SECTION 4.1. Guarantee ..................................................     9
SECTION 4.2. Waiver of Notice and Demand ................................    10
SECTION 4.3. Obligations Not Affected ...................................    10
SECTION 4.4. Rights of Holders ..........................................    11
SECTION 4.5. Guarantee of Payment .......................................    11
SECTION 4.6. Subrogation ................................................    11
SECTION 4.7. Independent Obligations ....................................    12
SECTION 4.8. Enforcement ................................................    12



                                       -i-



                                TABLE OF CONTENTS
                                   (continued)



                                                                            PAGE
                                                                            ----
                                                                         
                                    ARTICLE V
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 5.1. Limitation of Transactions .................................    12
SECTION 5.2. Ranking ....................................................    13

                                   ARTICLE VI
                                   TERMINATION

SECTION 6.1. Termination ................................................    13

                                   ARTICLE VII
                                 INDEMNIFICATION

SECTION 7.1. Exculpation ................................................    14
SECTION 7.2. Indemnification ............................................    14
SECTION 7.3. Compensation; Reimbursement of Expenses ....................    15

                                  ARTICLE VIII
                                  MISCELLANEOUS

SECTION 8.1. Successors and Assigns .....................................    16
SECTION 8.2. Amendments .................................................    16
SECTION 8.3. Notices ....................................................    16
SECTION 8.4. Benefit ....................................................    17
SECTION 8.5. Governing Law ..............................................    17
SECTION 8.6. Counterparts ...............................................    17



                                      -ii-



                               GUARANTEE AGREEMENT

          This GUARANTEE AGREEMENT (the "Guarantee"), dated as of December 28,
2006, is executed and delivered by Independent Bank Corp., incorporated in
Massachusetts (the "Guarantor"), and LaSalle Bank National Association, as
trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Capital Securities (as defined herein) of
Independent Capital Trust V, a Delaware statutory trust (the "Issuer").

          WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of December 28, 2006, among the trustees named therein
of the Issuer, the administrators of the Issuer named therein, Independent Bank
Corp., as sponsor, and the Holders from time to time of undivided beneficial
interests in the assets of the Issuer, the Issuer is issuing on the date hereof
securities, having an aggregate liquidation amount of up to $50,000,000,
designated the TP Securities (the "Capital Securities"); and

          WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Guarantee, to pay to the Holders of Capital
Securities the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein.

          NOW, THEREFORE, in consideration of the purchase by each Holder of the
Capital Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of
the Holders.

                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.1. Definitions and Interpretation.

          In this Guarantee, unless the context otherwise requires:

          (a) capitalized terms used in this Guarantee but not defined in the
     preamble above have the respective meanings assigned to them in this
     Section 1.1;

          (b) a term defined anywhere in this Guarantee has the same meaning
     throughout;

          (c) all references to "the Guarantee" or "this Guarantee" are to this
     Guarantee as modified, supplemented or amended from time to time;

          (d) all references in this Guarantee to Articles and Sections are to
     Articles and Sections of this Guarantee, unless otherwise specified;

          (e) terms defined in the Declaration as of the date of execution of
     this Guarantee have the same meanings when used in this Guarantee, unless
     otherwise defined in this Guarantee or unless the context otherwise
     requires; and

          (f) a reference to the singular includes the plural and vice versa.



          "Beneficiaries" means any Person to whom the Issuer is or hereafter
becomes indebted or liable.

          "Corporate Trust Office" means the office of the Guarantee Trustee at
which the corporate trust business of the Guarantee Trustee shall, at any
particular time, be principally administered.

          "Covered Person" means any Holder of Capital Securities.

          "Debentures" means the junior subordinated debentures of Independent
Bank Corp., designated the Junior Subordinated Debt Securities due 2037, held by
the Institutional Trustee (as defined in the Declaration) of the Issuer.

          "Event of Default" has the meaning set forth in Section 2.4.

          "Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Capital Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined
in the Declaration) which are required to be paid on such Capital Securities to
the extent the Issuer has funds available in the Property Account (as defined in
the Declaration) therefor at such time, (ii) the Redemption Price (as defined in
the Indenture) to the extent the Issuer has funds available in the Property
Account therefor at such time, with respect to any Capital Securities called for
redemption by the Issuer, (iii) the Special Redemption Price (as defined in the
Indenture) to the extent the Issuer has funds available in the Property Account
therefor at such time, with respect to Capital Securities called for redemption
upon the occurrence of a Special Event (as defined in the Indenture), and (iv)
upon a voluntary or involuntary liquidation, dissolution, winding-up or
termination of the Issuer (other than in connection with the distribution of
Debentures to the Holders of the Capital Securities in exchange therefor as
provided in the Declaration), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Capital Securities to the
date of payment, to the extent the Issuer has funds available in the Property
Account therefor at such time, and (b) the amount of assets of the Issuer
remaining available for distribution to Holders in liquidation of the Issuer
after satisfaction of liabilities to creditors of the Issuer as required by
applicable law (in either case, the "Liquidation Distribution").

          "Guarantee Trustee" means LaSalle Bank National Association, until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee and thereafter means each such Successor
Guarantee Trustee.

          "Holder" means any holder, as registered on the books and records of
the Issuer, of any Capital Securities; provided, however, that, in determining
whether the holders of the requisite percentage of Capital Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliate of the Guarantor.

          "Indemnified Person" means the Guarantee Trustee (including in its
individual capacity), any Affiliate of the Guarantee Trustee, or any officers,
directors, shareholders, members, partners, employees, representatives,
nominees, custodians or agents of the Guarantee Trustee.


                                       -2-


          "Indenture" means the Indenture, dated as of December 28, 2006,
between the Guarantor and LaSalle Bank National Association, not in its
individual capacity but solely as trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued to the Institutional
Trustee of the Issuer.

          "Liquidation Distribution" has the meaning set forth in the definition
of "Guarantee Payments" herein.

          "Majority in liquidation amount of the Capital Securities" means
Holder(s) of outstanding Capital Securities, voting together as a class, but
separately from the holders of Common Securities, of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to,
but excluding, the date upon which the voting percentages are determined) of all
Capital Securities then outstanding.

          "Obligations" means any costs, expenses or liabilities (but not
including liabilities related to taxes) of the Issuer, other than obligations of
the Issuer to pay to holders of any Trust Securities the amounts due such
holders pursuant to the terms of the Trust Securities.

          "Officer's Certificate" means, with respect to any Person, a
certificate signed by one Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Guarantee shall include:

          (a) a statement that each officer signing the Officer's Certificate
     has read the covenant or condition and the definitions relating thereto;

          (b) a brief statement of the nature and scope of the examination or
     investigation undertaken by each officer in rendering the Officer's
     Certificate;

          (c) a statement that each such officer has made such examination or
     investigation as, in such officer's opinion, is necessary to enable such
     officer to express an informed opinion as to whether or not such covenant
     or condition has been complied with; and

          (d) a statement as to whether, in the opinion of each such officer,
     such condition or covenant has been complied with.

          "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

          "Responsible Officer" means, with respect to the Guarantee Trustee,
any officer within the CDO Trust Services Group of the Corporate Trust Office of
the Guarantee Trustee with direct responsibility for the administration of any
matters relating to this Guarantee, including any vice president, any assistant
vice president, any secretary, any assistant secretary, the treasurer, any
assistant treasurer, any trust officer or other officer of the Corporate Trust
Office of the Guarantee Trustee customarily performing functions similar to
those performed by


                                       -3-



any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.

          "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 3.1.

          "Trust Securities" means the Common Securities and the Capital
Securities.

                                   ARTICLE II
               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

SECTION 2.1. Powers and Duties of the Guarantee Trustee.

          (a) This Guarantee shall be held by the Guarantee Trustee for the
     benefit of the Holders of the Capital Securities, and the Guarantee Trustee
     shall not transfer this Guarantee to any Person except a Holder of Capital
     Securities exercising his or her rights pursuant to Section 4.4(b) or to a
     Successor Guarantee Trustee on acceptance by such Successor Guarantee
     Trustee of its appointment to act as Successor Guarantee Trustee. The
     right, title and interest of the Guarantee Trustee shall automatically vest
     in any Successor Guarantee Trustee, and such vesting and cessation of title
     shall be effective whether or not conveyancing documents have been executed
     and delivered pursuant to the appointment of such Successor Guarantee
     Trustee.

          (b) If an Event of Default actually known to a Responsible Officer of
     the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee
     shall enforce this Guarantee for the benefit of the Holders of the Capital
     Securities.

          (c) The Guarantee Trustee, before the occurrence of any Event of
     Default and after the curing or waiving of all Events of Default that may
     have occurred, shall undertake to perform only such duties as are
     specifically set forth in this Guarantee, and no implied covenants shall be
     read into this Guarantee against the Guarantee Trustee. In case an Event of
     Default has occurred (that has not been cured or waived pursuant to Section
     2.4(b)) and is actually known to a Responsible Officer of the Guarantee
     Trustee, the Guarantee Trustee shall exercise such of the rights and powers
     vested in it by this Guarantee, and use the same degree of care and skill
     in its exercise thereof, as a prudent person would exercise or use under
     the circumstances in the conduct of his or her own affairs.

          (d) No provision of this Guarantee shall be construed to relieve the
     Guarantee Trustee from liability for its own negligent action, its own
     negligent failure to act, or its own willful misconduct or bad faith,
     except that:

               (i) prior to the occurrence of any Event of Default and after the
          curing or waiving of all Events of Default that may have occurred:

                    (A) the duties and obligations of the Guarantee Trustee
               shall be determined solely by the express provisions of this
               Guarantee, and the


                                       -4-



               Guarantee Trustee shall not be liable except for the performance
               of such duties and obligations as are specifically set forth in
               this Guarantee, and no implied covenants or obligations shall be
               read into this Guarantee against the Guarantee Trustee; and

                    (B) in the absence of bad faith on the part of the Guarantee
               Trustee, the Guarantee Trustee may conclusively rely, as to the
               truth of the statements and the correctness of the opinions
               expressed therein, upon any certificates or opinions furnished to
               the Guarantee Trustee and conforming to the requirements of this
               Guarantee; but in the case of any such certificates or opinions
               furnished to the Guarantee Trustee, the Guarantee Trustee shall
               be under a duty to examine the same to determine whether or not
               on their face they conform to the requirements of this Guarantee;

               (ii) the Guarantee Trustee shall not be liable for any error of
          judgment made in good faith by a Responsible Officer of the Guarantee
          Trustee, unless it shall be proved that such Responsible Officer of
          the Guarantee Trustee or the Guarantee Trustee was negligent in
          ascertaining the pertinent facts upon which such judgment was made;

               (iii) the Guarantee Trustee shall not be liable with respect to
          any action taken or omitted to be taken by it in good faith in
          accordance with the written direction of the Holders of not less than
          a Majority in liquidation amount of the Capital Securities relating to
          the time, method and place of conducting any proceeding for any remedy
          available to the Guarantee Trustee, or exercising any trust or power
          conferred upon the Guarantee Trustee under this Guarantee; and

               (iv) no provision of this Guarantee shall require the Guarantee
          Trustee to expend or risk its own funds or otherwise incur personal
          financial liability in the performance of any of its duties or in the
          exercise of any of its rights or powers, if the Guarantee Trustee
          shall have reasonable grounds for believing that the repayment of such
          funds is not reasonably assured to it under the terms of this
          Guarantee, or security and indemnity, reasonably satisfactory to the
          Guarantee Trustee, against such risk or liability is not reasonably
          assured to it.

SECTION 2.2. Certain Rights of the Guarantee Trustee.

          (a) Subject to the provisions of Section 2.1:

               (i) The Guarantee Trustee may conclusively rely, and shall be
          fully protected in acting or refraining from acting upon, any
          resolution, certificate, statement, instrument, opinion, report,
          notice, request, direction, consent, order, bond, debenture, note,
          other evidence of indebtedness or other paper or document believed by
          it to be genuine and to have been signed, sent or presented by the
          proper party or parties.

               (ii) Any direction or act of the Guarantor contemplated by this
          Guarantee shall be sufficiently evidenced by an Officer's Certificate.


                                       -5-



               (iii) Whenever, in the administration of this Guarantee, the
          Guarantee Trustee shall deem it desirable that a matter be proved or
          established before taking, suffering or omitting any action hereunder,
          the Guarantee Trustee (unless other evidence is herein specifically
          prescribed) may, in the absence of bad faith on its part, request and
          conclusively rely upon an Officer's Certificate of the Guarantor
          which, upon receipt of such request, shall be promptly delivered by
          the Guarantor.

               (iv) The Guarantee Trustee shall have no duty to see to any
          recording, filing or registration of any instrument or other writing
          (or any rerecording, refiling or reregistration thereof).

               (v) The Guarantee Trustee may consult with counsel of its
          selection, and the advice or opinion of such counsel with respect to
          legal matters shall be full and complete authorization and protection
          in respect of any action taken, suffered or omitted by it hereunder in
          good faith and in accordance with such advice or opinion. Such counsel
          may be counsel to the Guarantor or any of its Affiliates and may
          include any of its employees. The Guarantee Trustee shall have the
          right at any time to seek instructions concerning the administration
          of this Guarantee from any court of competent jurisdiction.

               (vi) The Guarantee Trustee shall be under no obligation to
          exercise any of the rights or powers vested in it by this Guarantee at
          the request or direction of any Holder, unless such Holder shall have
          provided to the Guarantee Trustee such security and indemnity,
          reasonably satisfactory to the Guarantee Trustee, against the costs,
          expenses (including attorneys' fees and expenses and the expenses of
          the Guarantee Trustee's agents, nominees or custodians) and
          liabilities that might be incurred by it in complying with such
          request or direction, including such reasonable advances as may be
          requested by the Guarantee Trustee; provided, however, that nothing
          contained in this Section 2.2(a)(vi) shall be taken to relieve the
          Guarantee Trustee, upon the occurrence of an Event of Default, of its
          obligation to exercise the rights and powers vested in it by this
          Guarantee.

               (vii) The Guarantee Trustee shall not be bound to make any
          investigation into the facts or matters stated in any resolution,
          certificate, statement, instrument, opinion, report, notice, request,
          direction, consent, order, bond, debenture, note, other evidence of
          indebtedness or other paper or document, but the Guarantee Trustee, in
          its discretion, may make such further inquiry or investigation into
          such facts or matters as it may see fit.

               (viii) The Guarantee Trustee may execute any of the trusts or
          powers hereunder or perform any duties hereunder either directly or by
          or through agents, nominees, custodians or attorneys, and the
          Guarantee Trustee shall not be responsible for any misconduct or
          negligence on the part of any agent or attorney appointed with due
          care by it hereunder.


                                       -6-



               (ix) Any action taken by the Guarantee Trustee or its agents
          hereunder shall bind the Holders of the Capital Securities, and the
          signature of the Guarantee Trustee or its agents alone shall be
          sufficient and effective to perform any such action. No third party
          shall be required to inquire as to the authority of the Guarantee
          Trustee to so act or as to its compliance with any of the terms and
          provisions of this Guarantee, both of which shall be conclusively
          evidenced by the Guarantee Trustee's or its agent's taking such
          action.

               (x) Whenever in the administration of this Guarantee the
          Guarantee Trustee shall deem it desirable to receive instructions with
          respect to enforcing any remedy or right or taking any other action
          hereunder, the Guarantee Trustee (A) may request instructions from the
          Holders of a Majority in liquidation amount of the Capital Securities,
          (B) may refrain from enforcing such remedy or right or taking such
          other action until such instructions are received and (C) shall be
          protected in conclusively relying on or acting in accordance with such
          instructions.

               (xi) The Guarantee Trustee shall not be liable for any action
          taken, suffered, or omitted to be taken by it in good faith and
          reasonably believed by it to be authorized or within the discretion or
          rights or powers conferred upon it by this Guarantee.

          (b) No provision of this Guarantee shall be deemed to impose any duty
     or obligation on the Guarantee Trustee to perform any act or acts or
     exercise any right, power, duty or obligation conferred or imposed on it,
     in any jurisdiction in which it shall be illegal or in which the Guarantee
     Trustee shall be unqualified or incompetent in accordance with applicable
     law to perform any such act or acts or to exercise any such right, power,
     duty or obligation. No permissive power or authority available to the
     Guarantee Trustee shall be construed to be a duty.

SECTION 2.3. Not Responsible for Recitals or Issuance of Guarantee.

          The recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representation as to the validity or sufficiency of this Guarantee.

SECTION 2.4. Events of Default; Waiver.

          (a) An Event of Default under this Guarantee will occur upon the
     failure of the Guarantor to perform any of its payment or other obligations
     hereunder.

          (b) The Holders of a Majority in liquidation amount of the Capital
     Securities may, voting or consenting as a class, on behalf of the Holders
     of all of the Capital Securities, waive any past Event of Default and its
     consequences. Upon such waiver, any such Event of Default shall cease to
     exist, and shall be deemed to have been cured, for every purpose of this
     Guarantee, but no such waiver shall extend to any subsequent or other
     default or Event of Default or impair any right consequent thereon.


                                       -7-



SECTION 2.5. Events of Default; Notice.

          (a) The Guarantee Trustee shall, within 90 days after the occurrence
     of an Event of Default, transmit by mail, first class postage prepaid, to
     the Holders of the Capital Securities, notices of all Events of Default
     actually known to a Responsible Officer of the Guarantee Trustee, unless
     such defaults have been cured before the giving of such notice; provided,
     however, that the Guarantee Trustee shall be protected in withholding such
     notice if and so long as a Responsible Officer of the Guarantee Trustee in
     good faith determines that the withholding of such notice is in the
     interests of the Holders of the Capital Securities.

          (b) The Guarantee Trustee shall not be charged with knowledge of any
     Event of Default unless the Guarantee Trustee shall have received written
     notice thereof from the Guarantor or a Holder of the Capital Securities, or
     a Responsible Officer of the Guarantee Trustee charged with the
     administration of this Guarantee shall have actual knowledge thereof.

                                   ARTICLE III
                              THE GUARANTEE TRUSTEE

SECTION 3.1. The Guarantee Trustee; Eligibility.

          (a) There shall at all times be a Guarantee Trustee which shall:

               (i) not be an Affiliate of the Guarantor; and

               (ii) be a corporation or national association organized and doing
          business under the laws of the United States of America or any state
          or territory thereof or of the District of Columbia, or Person
          authorized under such laws to exercise corporate trust powers, having
          a combined capital and surplus of at least Fifty Million U.S. Dollars
          ($50,000,000), and subject to supervision or examination by federal,
          state, territorial or District of Columbia authority. If such
          corporation or national association publishes reports of condition at
          least annually, pursuant to law or to the requirements of the
          supervising or examining authority referred to above, then, for the
          purposes of this Section 3.1(a)(ii), the combined capital and surplus
          of such corporation or national association shall be deemed to be its
          combined capital and surplus as set forth in its most recent report of
          condition so published.

          (b) If at any time the Guarantee Trustee shall cease to be eligible to
     so act under Section 3.1(a), the Guarantee Trustee shall immediately resign
     in the manner and with the effect set forth in Section 3.2(c).

          (c) If the Guarantee Trustee has or shall acquire any "conflicting
     interest' within the meaning of Section 310(b) of the Trust Indenture Act,
     the Guarantee Trustee shall either eliminate such interest or resign to the
     extent and in the manner provided by, and subject to, this Guarantee.


                                       -8-



SECTION 3.2. Appointment, Removal and Resignation of the Guarantee Trustee.

          (a) Subject to Section 3.2(b), the Guarantee Trustee may be appointed
     or removed without cause at any time by the Guarantor except during an
     Event of Default.

          (b) The Guarantee Trustee shall not be removed in accordance with
     Section 3.2(a) until a Successor Guarantee Trustee has been appointed and
     has accepted such appointment by written instrument executed by such
     Successor Guarantee Trustee and delivered to the Guarantor.

          (c) The Guarantee Trustee appointed to office shall hold office until
     a Successor Guarantee Trustee shall have been appointed or until its
     removal or resignation. The Guarantee Trustee may resign from office
     (without need for prior or subsequent accounting) by an instrument in
     writing executed by the Guarantee Trustee and delivered to the Guarantor,
     which resignation shall not take effect until a Successor Guarantee Trustee
     has been appointed and has accepted such appointment by an instrument in
     writing executed by such Successor Guarantee Trustee and delivered to the
     Guarantor and the resigning Guarantee Trustee.

          (d) If no Successor Guarantee Trustee shall have been appointed and
     accepted appointment as provided in this Section 3.2 within 60 days after
     delivery of an instrument of removal or resignation, the Guarantee Trustee
     resigning or being removed may petition any court of competent jurisdiction
     for appointment of a Successor Guarantee Trustee. Such court may thereupon,
     after prescribing such notice, if any, as it may deem proper, appoint a
     Successor Guarantee Trustee.

          (e) No Guarantee Trustee shall be liable for the acts or omissions to
     act of any Successor Guarantee Trustee.

          (f) Upon termination of this Guarantee or removal or resignation of
     the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay
     to the Guarantee Trustee all amounts owing to the Guarantee Trustee under
     Sections 7.2 and 7.3 accrued to the date of such termination, removal or
     resignation.

                                   ARTICLE IV
                                   GUARANTEE

SECTION 4.1. Guarantee.

          (a) The Guarantor irrevocably and unconditionally agrees to pay in
     full to the Holders the Guarantee Payments (without duplication of amounts
     theretofore paid by the Issuer), as and when due, regardless of any defense
     (except as defense of payment by the Issuer), right of set-off or
     counterclaim that the Issuer may have or assert. The Guarantor's obligation
     to make a Guarantee Payment may be satisfied by direct payment of the
     required amounts by the Guarantor to the Holders or by causing the Issuer
     to pay such amounts to the Holders.


                                       -9-



          (b) The Guarantor hereby also agrees to assume any and all Obligations
     of the Issuer and in the event any such Obligation is not so assumed,
     subject to the terms and conditions hereof, the Guarantor hereby
     irrevocably and unconditionally guarantees to each Beneficiary the full
     payment, when and as due, of any and all Obligations to such Beneficiaries.
     This Guarantee is intended to be for the Beneficiaries who have received
     notice hereof.

SECTION 4.2. Waiver of Notice and Demand.

          The Guarantor hereby waives notice of acceptance of this Guarantee and
of any liability to which it applies or may apply, presentment, demand for
payment, any right to require a proceeding first against the Issuer or any other
Person before proceeding against the Guarantor, protest, notice of nonpayment,
notice of dishonor, notice of redemption and all other notices and demands.

SECTION 4.3. Obligations Not Affected.

          The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:

          (a) the release or waiver, by operation of law or otherwise, of the
     performance or observance by the Issuer of any express or implied
     agreement, covenant, term or condition relating to the Capital Securities
     to be performed or observed by the Issuer;

          (b) the extension of time for the payment by the Issuer of all or any
     portion of the Distributions, Redemption Price, Special Redemption Price,
     Liquidation Distribution or any other sums payable under the terms of the
     Capital Securities or the extension of time for the performance of any
     other obligation under, arising out of, or in connection with, the Capital
     Securities (other than an extension of time for the payment of the
     Distributions, Redemption Price, Special Redemption Price, Liquidation
     Distribution or other sums payable that results from the extension of any
     interest payment period on the Debentures or any extension of the maturity
     date of the Debentures permitted by the Indenture);

          (c) any failure, omission, delay or lack of diligence on the part of
     the Holders to enforce, assert or exercise any right, privilege, power or
     remedy conferred on the Holders pursuant to the terms of the Capital
     Securities, or any action on the part of the Issuer granting indulgence or
     extension of any kind;

          (d) the voluntary or involuntary liquidation, dissolution, sale of any
     collateral, receivership, insolvency, bankruptcy, assignment for the
     benefit of creditors, reorganization, arrangement, composition or
     readjustment of debt of, or other similar proceedings affecting, the Issuer
     or any of the assets of the Issuer;

          (e) any invalidity of, or defect or deficiency in, the Capital
     Securities;


                                      -10-



          (f) the settlement or compromise of any obligation guaranteed hereby
     or hereby incurred; or

          (g) any other circumstance whatsoever that might otherwise constitute
     a legal or equitable discharge or defense of a guarantor, it being the
     intent of this Section 4.3 that the obligations of the Guarantor hereunder
     shall be absolute and unconditional under any and all circumstances.

          There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.

SECTION 4.4. Rights of Holders.

          (a) The Holders of a Majority in liquidation amount of the Capital
     Securities have the right to direct the time, method and place of
     conducting any proceeding for any remedy available to the Guarantee Trustee
     in respect of this Guarantee or to direct the exercise of any trust or
     power conferred upon the Guarantee Trustee under this Guarantee; provided,
     however, that (subject to Sections 2.1 and 2.2) the Guarantee Trustee shall
     have the right to decline to follow any such direction if the Guarantee
     Trustee shall determine that the actions so directed would be unjustly
     prejudicial to the Holders not taking part in such direction or if the
     Guarantee Trustee being advised by legal counsel determines that the action
     or proceeding so directed may not lawfully be taken or if the Guarantee
     Trustee in good faith by its board of directors or trustees, executive
     committee or a trust committee of directors or trustees and/or Responsible
     Officers shall determine that the action or proceeding so directed would
     involve the Guarantee Trustee in personal liability.

          (b) Any Holder of Capital Securities may institute a legal proceeding
     directly against the Guarantor to enforce the Guarantee Trustee's rights
     under this Guarantee, without first instituting a legal proceeding against
     the Issuer, the Guarantee Trustee or any other Person. The Guarantor waives
     any right or remedy to require that any such action be brought first
     against the Issuer, the Guarantee Trustee or any other Person before so
     proceeding directly against the Guarantor.

SECTION 4.5. Guarantee of Payment.

          This Guarantee creates a guarantee of payment and not of collection.

SECTION 4.6. Subrogation.

          The Guarantor shall be subrogated to all (if any) rights of the
Holders of Capital Securities against the Issuer in respect of any amounts paid
to such Holders by the Guarantor under this Guarantee; provided, however, that
the Guarantor shall not (except to the extent required by applicable provisions
of law) be entitled to enforce or exercise any right that it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee, if, after giving effect to any such
payment, any amounts are due and unpaid under this Guarantee. If any amount
shall be paid to the Guarantor


                                      -11-



in violation of the preceding sentence, the Guarantor agrees to hold such amount
in trust for the Holders and to pay over such amount to the Holders.

SECTION 4.7. Independent Obligations.

          The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Capital
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 4.3 hereof.

SECTION 4.8. Enforcement.

          A Beneficiary may enforce the Obligations of the Guarantor contained
in Section 4.1(b) directly against the Guarantor, and the Guarantor waives any
right or remedy to require that any action be brought against the Issuer or any
other person or entity before proceeding against the Guarantor.

          The Guarantor shall be subrogated to all rights (if any) of any
Beneficiary against the Issuer in respect of any amounts paid to the
Beneficiaries by the Guarantor under this Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by applicable provisions of
law) be entitled to enforce or exercise any rights that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee, if, after giving effect to such
payment, any amounts are due and unpaid under this Guarantee.

                                    ARTICLE V
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 5.1. Limitation of Transactions.

          So long as any Capital Securities remain outstanding, if (a) there
shall have occurred and be continuing an Event of Default or (b) the Guarantor
shall have selected an Extension Period as provided in the Declaration and such
period, or any extension thereof, shall have commenced and be continuing, then
the Guarantor may not (x) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Guarantor's capital stock or (y) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Guarantor that rank pari passu in all respects with or junior
in interest to the Debentures (other than (i) payments under this Guarantee,
(ii) repurchases, redemptions or other acquisitions of shares of capital stock
of the Guarantor (A) in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of one or more employees,
officers, directors, or consultants, (B) in connection with a dividend
reinvestment or stockholder stock purchase plan or (C) in connection with the
issuance of capital stock of the Guarantor (or securities convertible into or
exercisable for such capital stock), as consideration in an acquisition
transaction entered into prior to the occurrence of the Event of Default or the
applicable Extension Period, (iii) as a result of any exchange,
reclassification, combination or conversion of any class or series of the
Guarantor's capital stock (or any capital stock of a


                                      -12-



subsidiary of the Guarantor) for any class or series of the Guarantor's capital
stock or of any class or series of the Guarantor's indebtedness for any class or
series of the Guarantor's capital stock, (iv) the purchase of fractional
interests in shares of the Guarantor's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged, (v) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (vi) any dividend in the form of stock, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock).

SECTION 5.2. Ranking.

          This Guarantee will constitute an unsecured obligation of the
Guarantor and will rank subordinate and junior in right of payment to all
present and future Senior Indebtedness (as defined in the Indenture) of the
Guarantor. By their acceptance thereof, each Holder of Capital Securities agrees
to the foregoing provisions of this Guarantee and the other terms set forth
herein.

          The right of the Guarantor to participate in any distribution of
assets of any of its subsidiaries upon any such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of that
subsidiary, except to the extent the Guarantor may itself be recognized as a
creditor of that subsidiary. Accordingly, the Guarantor's obligations under this
Guarantee will be effectively subordinated to all existing and future
liabilities of the Guarantor's subsidiaries, and claimants should look only to
the assets of the Guarantor for payments thereunder. This Guarantee does not
limit the incurrence or issuance of other secured or unsecured debt of the
Guarantor, including Senior Indebtedness of the Guarantor, under any indenture
or agreement that the Guarantor may enter into in the future or otherwise.

                                    ARTICLE VI
                                   TERMINATION

SECTION 6.1. Termination.

          This Guarantee shall terminate as to the Capital Securities (i) upon
full payment of the Redemption Price or the Special Redemption Price, as the
case may be, of all Capital Securities then outstanding, (ii) upon the
distribution of all of the Debentures to the Holders of all of the Capital
Securities or (iii) upon full payment of the amounts payable in accordance with
the Declaration upon dissolution of the Issuer. This Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
Holder of Capital Securities must restore payment of any sums paid under the
Capital Securities or under this Guarantee.


                                      -13-



                                   ARTICLE VII
                                 INDEMNIFICATION

SECTION 7.1. Exculpation.

          (a) No Indemnified Person shall be liable, responsible or accountable
     in damages or otherwise to the Guarantor or any Covered Person for any
     loss, damage or claim incurred by reason of any act or omission of such
     Indemnified Person in good faith in accordance with this Guarantee and in a
     manner that such Indemnified Person reasonably believed to be within the
     scope of the authority conferred on such Indemnified Person by this
     Guarantee or by law, except that an Indemnified Person shall be liable for
     any such loss, damage or claim incurred by reason of such Indemnified
     Person's negligence, willful misconduct or bad faith with respect to such
     acts or omissions.

          (b) An Indemnified Person shall be fully protected in relying in good
     faith upon the records of the Issuer or the Guarantor and upon such
     information, opinions, reports or statements presented to the Issuer or the
     Guarantor by any Person as to matters the Indemnified Person reasonably
     believes are within such other Person's professional or expert competence
     and who, if selected by such Indemnified Person, has been selected with
     reasonable care by such Indemnified Person, including information,
     opinions, reports or statements as to the value and amount of the assets,
     liabilities, profits, losses, or any other facts pertinent to the existence
     and amount of assets from which Distributions to Holders of Capital
     Securities might properly be paid.

SECTION 7.2. Indemnification.

          (a) The Guarantor agrees to indemnify each Indemnified Person for, and
     to hold each Indemnified Person harmless against, any and all loss,
     liability, damage, claim or expense incurred without negligence, willful
     misconduct or bad faith on the part of the Indemnified Person, arising out
     of or in connection with the acceptance or administration of the trust or
     trusts hereunder, including but not limited to the costs and expenses
     (including reasonable legal fees and expenses) of the Indemnified Person
     defending itself against, or investigating, any claim or liability in
     connection with the exercise or performance of any of the Indemnified
     Person's powers or duties hereunder. The obligation to indemnify as set
     forth in this Section 7.2 shall survive the resignation or removal of the
     Guarantee Trustee and the termination of this Guarantee.

          (b) Promptly after receipt by an Indemnified Person under this Section
     7.2 of notice of the commencement of any action, such Indemnified Person
     will, if a claim in respect thereof is to be made against the Guarantor
     under this Section 7.2, notify the Guarantor in writing of the commencement
     thereof; but the failure so to notify the Guarantor (i) will not relieve
     the Guarantor from liability under paragraph (a) above unless and to the
     extent that the Guarantor did not otherwise learn of such action and such
     failure results in the forfeiture by the Guarantor of substantial rights
     and defenses and (ii) will not, in any event, relieve the Guarantor from
     any obligations to any Indemnified Person other than the indemnification
     obligation provided in paragraph (a) above. The Guarantor shall be entitled
     to appoint counsel of the Guarantor's choice at the Guarantor's


                                      -14-



     expense to represent the Indemnified Person in any action for which
     indemnification is sought (in which case the Guarantor shall not thereafter
     be responsible for the fees and expenses of any separate counsel retained
     by the Indemnified Person or Persons except as set forth below); provided,
     however, that such counsel shall be satisfactory to the Indemnified Person.
     Notwithstanding the Guarantor's election to appoint counsel to represent
     the Indemnified Person in any action, the Indemnified Person shall have the
     right to employ separate counsel (including local counsel), and the
     Guarantor shall bear the reasonable fees, costs and expenses of such
     separate counsel (and local counsel), if (i) the use of counsel chosen by
     the Guarantor to represent the Indemnified Person would present such
     counsel with a conflict of interest, (ii) the actual or potential
     defendants in, or targets of, any such action include both the Indemnified
     Person and the Guarantor and the Indemnified Person shall have reasonably
     concluded that there may be legal defenses available to it and/or other
     Indemnified Persons which are different from or additional to those
     available to the Guarantor, (iii) the Guarantor shall not have employed
     counsel satisfactory to the Indemnified Person to represent the Indemnified
     Person within a reasonable time after notice of the institution of such
     action or (iv) the Guarantor shall authorize the Indemnified Person to
     employ separate counsel at the expense of the Guarantor. The Guarantor will
     not, without the prior written consent of the Indemnified Persons, settle
     or compromise or consent to the entry of any judgment with respect to any
     pending or threatened claim, action, suit or proceeding in respect of which
     indemnification or contribution may be sought hereunder (whether or not the
     Indemnified Persons are actual or potential parties to such claim or
     action) unless such settlement, compromise or consent includes an
     unconditional release of each Indemnified Person from all liability arising
     out of such claim, action, suit or proceeding.

SECTION 7.3. Compensation; Reimbursement of Expenses.

          Other than as provided in the Fee Agreement of even date herewith
between the Guarantor, Cohen & Company and the Guarantee Trustee, the Guarantor
agrees:

          (a) to pay to the Guarantee Trustee from time to time such
     compensation for all services rendered by it hereunder as the parties shall
     agree to from time to time (which compensation shall not be limited by any
     provision of law in regard to the compensation of a trustee of an express
     trust); and

          (b) except as otherwise expressly provided herein, to reimburse the
     Guarantee Trustee upon request for all reasonable expenses, disbursements
     and advances incurred or made by it in accordance with any provision of
     this Guarantee (including the reasonable compensation and the expenses and
     disbursements of its agents and counsel), except any such expense,
     disbursement or advance as may be attributable to its negligence, willful
     misconduct or bad faith.

          The provisions of this Section 7.3 shall survive the resignation or
removal of the Guarantee Trustee and the termination of this Guarantee.


                                      -15-



                                  ARTICLE VIII
                                  MISCELLANEOUS

SECTION 8.1. Successors and Assigns.

          All guarantees and agreements contained in this Guarantee shall bind
the successors, assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders of the Capital
Securities then outstanding. Except in connection with any merger or
consolidation of the Guarantor with or into another entity or any sale, transfer
or lease of the Guarantor's assets or capital stock to another entity, in each
case to the extent permitted under the Indenture, the Guarantor may not assign
its rights or delegate its obligations under this Guarantee without the prior
approval of the Holders of not less than a Majority in liquidation amount of the
Capital Securities.

SECTION 8.2. Amendments.

          Except with respect to any changes that do not adversely affect the
rights of Holders of the Capital Securities in any material respect (in which
case no consent of Holders will be required), this Guarantee may be amended only
with the prior approval of the Holders of not less than a Majority in
liquidation amount of the Capital Securities. The provisions of the Declaration
with respect to amendments thereof shall apply equally with respect to
amendments of the Guarantee.

SECTION 8.3. Notices.

          All notices provided for in this Guarantee shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by first class mail, as follows:

          (a) If given to the Guarantee Trustee, at the Guarantee Trustee's
     mailing address set forth below (or such other address as the Guarantee
     Trustee may give notice of to the Holders of the Capital Securities):

               LaSalle Bank National Association
               135 S. LaSalle Street, Suite 1511
               Chicago, Illinois 60603
               Attention: CDO Trust Services Group
               Independent Capital Trust V
               Telecopy: (312) 904-0524
               Telephone: (312) 904-0283

          (b) If given to the Guarantor, at the Guarantor's mailing address set
     forth below (or such other address as the Guarantor may give notice of to
     the Holders of the Capital Securities and to the Guarantee Trustee):


                                      -16-



               Independent Bank Corp.
               288 Union Street
               Rockland, Massachusetts 02370
               Attention: George Lamb
               Telecopy: (781) 982-6591
               Telephone: (781) 982-6879

          (c) If given to any Holder of the Capital Securities, at the address
     set forth on the books and records of the Issuer.

          All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.

SECTION 8.4. Benefit.

          This Guarantee is solely for the benefit of the Holders of the Capital
Securities and, subject to Section 2.1(a), is not separately transferable from
the Capital Securities.

SECTION 8.5. Governing Law.

          THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES
THEREOF (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).

SECTION 8.6. Counterparts.

          This Guarantee may contain more than one counterpart of the signature
page and this Guarantee may be executed by the affixing of the signature of the
Guarantor and the Guarantee Trustee to any of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.


                                      -17-




          THIS GUARANTEE is executed as of the day and year first above written.

                                        INDEPENDENT BANK CORP.,
                                        AS GUARANTOR


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        LASALLE BANK NATIONAL ASSOCIATION, AS
                                        GUARANTEE TRUSTEE


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

(10) Independent Bank Corp.


                                      -18-

EX-4.18

                                                                    Exhibit 4.18


                      CAPITAL SECURITIES PURCHASE AGREEMENT

                                October 12, 2006

     THIS CAPITAL SECURITIES PURCHASE AGREEMENT (this "Purchase Agreement") is
made among Independent Capital Trust V, a statutory trust created under the laws
of the State of Delaware (the "Trust"), Independent Bank Corp. (the "Company"
and, collectively with the Trust, the "Offerors") and Alesco Preferred Funding
XII, Ltd. (the "Purchaser").

                                    RECITALS:

     A. The Trust desires to issue 50,000 of its TP Securities (the "Capital
Securities"), with a liquidation amount of $1,000 per Capital Security,
representing undivided beneficial interests in the assets of the Trust (the
"Offering"), to be issued pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), by the Company, as Sponsor, LaSalle Bank National
Association, as Institutional Trustee, and Christiana Bank & Trust Company, as
Delaware Trustee, the Administrators named therein, and the holders, from time
to time, of the Capital Securities, which Capital Securities are to be
guaranteed by the Company with respect to distributions and payments upon
liquidation, redemption and otherwise to the extent provided in and pursuant to
the terms of a Guarantee Agreement between the Company and LaSalle Bank National
Association, as Guarantee Trustee (the "Guarantee"); and

     B. The proceeds from the sale of the Capital Securities will be combined
with the proceeds from the sale of the Common Securities by the Trust to the
Company and will be used by the Trust to purchase an equivalent aggregate
principal amount of Junior Subordinated Debt Securities due March 15, 2037 of
the Company (the "Debentures"), to be issued by the Company pursuant to an
Indenture to be executed by the Company, as Issuer, and LaSalle Bank National
Association, as Debenture Trustee (the "Indenture"); and

     C. In consideration of the premises and the mutual representations and
covenants hereinafter set forth, the parties hereto agree as follows:

                                    ARTICLE 1

                     PURCHASE AND SALE OF CAPITAL SECURITIES

     1.1 Upon the execution of this Purchase Agreement, the Purchaser hereby
agrees to purchase from the Trust 11,800 Capital Securities at a price equal to
$1,000 per Capital Security (the "Purchase Price") and the Trust agrees to sell
such number of Capital Securities with a liquidation amount of $1,000 per
Capital Security to the Purchaser for the Purchase Price. The rights and
preferences of the Capital Securities will be set forth in the Declaration in
form and substance reasonably acceptable to the Purchaser. The Purchase Price is
payable by the Purchaser on the Closing Date in immediately available funds to
the account designated by LaSalle Bank National Association.

     1.2 The certificate for the Capital Securities shall be delivered in
definitive form by the Trust on the Closing Date (as defined in the Declaration)
to the Purchaser or its designee, and

(7)  Independent Bank Corp.



shall be registered in the name of the Purchaser and shall represent the
aggregate liquidation amount of the Capital Securities being purchased by the
Purchaser.

     1.3 The Purchaser acknowledges and the Offerors agree that they will not
register any transfer of the Capital Securities not made in accordance with
Regulation S, pursuant to registration under the Securities Act of 1933, as
amended (the "Securities Act"), or pursuant to an available exemption from
registration.

     1.4 The Placement Agreement, dated October 12, 2006 (the "Placement
Agreement"), among the Offerors and the Placement Agent identified therein
includes certain representations and warranties, covenants and conditions to
closing and certain other matters governing the issuance and sale of the Capital
Securities by the Trust to the Purchaser. Each of the provisions of the
Placement Agreement, including the definitions therein, are hereby incorporated
by reference into this Purchase Agreement. In addition, to the extent provided
for in the Placement Agreement, the Purchaser shall be entitled to the benefits
of the Placement Agreement and shall be entitled to enforce such obligations of
the Offerors under the Placement Agreement as fully as if the Purchaser were a
party to such Placement Agreement, it being agreed between the parties that any
and all representations made by the Offerors to the Placement Agent in the
Placement Agreement shall be deemed to have also been made to the Purchaser.

     1.5 If any condition specified herein or in the Placement Agreement shall
not have been fulfilled when and as required to be fulfilled by, on behalf of or
in respect of the Offerors or the Capital Securities, this Purchase Agreement
may be terminated by the Purchaser by notice to the Offerors at any time at or
prior to the Closing Date, and such termination shall be without liability of
any party to any other party except that Sections 3, 9, 10 and 15 of the
Placement Agreement shall survive any such termination and remain in full force
and effect.

     1.6 Subject to the provisions of Article 2 hereof, the Purchaser may resell
the Preferred Securities to a subsequent purchaser either individually or on
behalf of a collateralized debt obligation investor ("CDO Investor") that is
sponsored or advised by such subsequent purchaser (any such purchaser from the
Purchaser and related CDO Investors are referred to hereinafter as a "Subsequent
Purchaser"). Upon transfer of the Preferred Securities to a Subsequent
Purchaser, the Subsequent Purchaser shall be entitled to each of the benefits of
the Placement Agent and the Purchaser under the Placement Agreement and this
Agreement, and shall be entitled to enforce the obligations of the Offerors
under the Placement Agreement and this Agreement, as fully as if the Subsequent
Purchaser were a party to the Placement Agreement and this Agreement.

                                    ARTICLE 2

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

     2.1 The Purchaser understands and acknowledges that none of the Capital
Securities, the Debentures or the Guarantee have been registered under the
Securities Act, or any other applicable securities laws, and are being offered
for sale by the Trust in a transaction not requiring registration under the
Securities Act, and the Capital Securities may not be offered, sold, pledged or
otherwise transferred by the Purchaser except in compliance with the


                                       -2-



registration requirements of the Securities Act, or any other applicable
securities laws, pursuant to an exemption therefrom or in a transaction not
subject thereto.

     2.2 The Purchaser represents and warrants that it is purchasing the Capital
Securities for its own account, for investment and not with a view to, or for
offer or sale in connection with, any distribution thereof in violation of the
Securities Act or other applicable securities laws, subject to any requirement
of law that the disposition of its property be at all times within its control
and subject to its ability to resell such Capital Securities pursuant to an
effective registration statement under the Securities Act or under Rules 144A
and 902 under the Securities Act or any other exemption from registration
available under the Securities Act, and the Purchaser agrees to the legends and
transfer restrictions applicable to the Capital Securities contained in the
Declaration. The Purchaser represents that it is an accredited investor within
the meaning of Regulation D under the Securities Act. The Purchaser represents
and warrants that the office or offices of the Purchaser in which its investment
decision was made is located at the address set forth in Section 3.1 hereof.

     2.3 The Purchaser has full power and authority to execute and deliver this
Purchase Agreement, to make the representations and warranties specified herein,
and to consummate the transactions contemplated herein and it has full right and
power to subscribe for the Capital Securities and perform its obligations
pursuant to this Purchase Agreement.

     2.4 The Purchaser believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the Capital
Securities. The Purchaser further represents that it has had an opportunity to
ask questions and receive answers from the Offerors regarding the terms and
conditions of the offering of the Capital Securities and the business,
properties, prospects and financial condition of the Offerors.

     2.5 No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any governmental body, agency or court
having jurisdiction over the Purchaser, other than those that have been made or
obtained, is necessary or required for the performance by the Purchaser of its
obligations under this Purchase Agreement or to consummate the transactions
contemplated herein.

     2.6 This Purchase Agreement has been duly authorized, executed and
delivered by the Purchaser.

     2.7 The Purchaser is not in violation of or default under any term of its
Memorandum of Association or Articles of Association, of any provision of any
mortgage, indenture, contract, agreement, instrument or contract to which it is
a party or by which it is bound or of any judgment, decree, order, writ or, any
statute, rule or regulation applicable to the Purchaser which would prevent the
Purchaser from performing any material obligation set forth in this Purchase
Agreement. The execution, delivery and performance of and compliance with this
Purchase Agreement, and the consummation of the transactions contemplated
herein, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute a
default under any such term, or the suspension, revocation, impairment,
forfeiture or non-renewal of any permit, license, authorization or approval
applicable to the Purchaser, its business or operations or any of its assets or
properties which


                                       -3-



would prevent the Purchaser from performing any material obligations set forth
in this Purchase Agreement.

     2.8 The Purchaser understands and acknowledges that the Company will rely
upon the truth and accuracy of the foregoing acknowledgments, representations,
warranties and agreements and agrees that, if any of the acknowledgments,
representations, warranties or agreements deemed to have been made by it by its
purchase of the Capital Securities are no longer accurate, it shall promptly
notify the Company.

     2.9 The Purchaser understands that no public market exists for any of the
Capital Securities, and that it is unlikely that a public market will ever exist
for the Capital Securities.

                                    ARTICLE 3

                                  MISCELLANEOUS

     3.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier, or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:

     To the Offerors:  Independent Bank Corp.
                       288 Union Street
                       Rockland, Massachusetts 02370
                       Attention: George Lamb
                       Telephone: (781) 982-6879
                       Fax: (781) 982-6591

     To the Purchaser: Alesco Preferred Funding XII, Ltd.
                       c/o Embassy & Co.
                       One Federal Street, 3rd Floor
                       Boston, Massachusetts 02110
                       Attention: Amy Byrnes
                       Telephone: (617) 603-6480
                       Fax: (866) 856-3442

     With a copy to:   Alesco Preferred Funding XII, Ltd.
                       Walker House
                       Mary Street
                       P.O. Box 908GT
                       George Town
                       Cayman Islands
                       Attention: The Directors
                       Telephone: 1 (345) 945-3727
                       Fax: 1 (345) 945-4757


                                       -4-



     Unless otherwise expressly provided herein, notices shall be deemed to have
been given when received.

     3.2 This Purchase Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged.

     3.3 Upon the execution and delivery of this Purchase Agreement by the
parties hereto, this Purchase Agreement shall become a binding obligation of
each such party with respect to the matters covered herein, including those
incorporated by reference from the Placement Agreement.

     3.4 NOTWITHSTANDING THE PLACE WHERE THIS PURCHASE AGREEMENT MAY BE EXECUTED
BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE TRUST, PURCHASER AND THE COMPANY, ON
BEHALF OF ITSELF AND ITS SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, THE
TRUST), HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL
AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY
SUIT, ACTION OR PROCEEDING RELATED TO THIS PURCHASE AGREEMENT OR ANY OF THE
MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL
JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH OF THE
TRUST, PURCHASER AND THE COMPANY, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES
(INCLUDING, WITHOUT LIMITATION, THE TRUST), IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

     3.5 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Purchase
Agreement.

     3.6 This Purchase Agreement may be executed in one or more counterparts
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.

     3.7 This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, except as herein contained. No course of
conduct or dealing shall be construed to modify, amend or otherwise affect any
of the provisions hereof.


                                       -5-



     IN WITNESS WHEREOF, this Purchase Agreement is agreed to and accepted as of
the day and year first written above.

                                        INDEPENDENT BANK CORP.


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        INDEPENDENT CAPITAL TRUST V
                                        BY INDEPENDENT BANK CORP., AS SPONSOR


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

(7)  Independent Bank Corp.


                                       -6-



     IN WITNESS WHEREOF, this Purchase Agreement is agreed to and accepted as of
the day and year first written above.

                                        ALESCO PREFERRED FUNDING XII, LTD.


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

(7)  Independent Bank Corp.


                                       -7-


                      CAPITAL SECURITIES PURCHASE AGREEMENT

                                October 12, 2006

     THIS CAPITAL SECURITIES PURCHASE AGREEMENT (this "Purchase Agreement") is
made among Independent Capital Trust V, a statutory trust created under the laws
of the State of Delaware (the "Trust"), Independent Bank Corp. (the "Company"
and, collectively with the Trust, the "Offerors") and Alesco Preferred Funding
XIII, Ltd. (the "Purchaser").

                                    RECITALS:

     A. The Trust desires to issue 50,000 of its TP Securities (the "Capital
Securities"), with a liquidation amount of $1,000 per Capital Security,
representing undivided beneficial interests in the assets of the Trust (the
"Offering"), to be issued pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), by the Company, as Sponsor, LaSalle Bank National
Association, as Institutional Trustee, and Christiana Bank & Trust Company, as
Delaware Trustee, the Administrators named therein, and the holders, from time
to time, of the Capital Securities, which Capital Securities are to be
guaranteed by the Company with respect to distributions and payments upon
liquidation, redemption and otherwise to the extent provided in and pursuant to
the terms of a Guarantee Agreement between the Company and LaSalle Bank National
Association, as Guarantee Trustee (the "Guarantee"); and

     B. The proceeds from the sale of the Capital Securities will be combined
with the proceeds from the sale of the Common Securities by the Trust to the
Company and will be used by the Trust to purchase an equivalent aggregate
principal amount of Junior Subordinated Debt Securities due March 15, 2037 of
the Company (the "Debentures"), to be issued by the Company pursuant to an
Indenture to be executed by the Company, as Issuer, and LaSalle Bank National
Association, as Debenture Trustee (the "Indenture"); and

     C. In consideration of the premises and the mutual representations and
covenants hereinafter set forth, the parties hereto agree as follows:

                                    ARTICLE 1

                     PURCHASE AND SALE OF CAPITAL SECURITIES

     1.1 Upon the execution of this Purchase Agreement, the Purchaser hereby
agrees to purchase from the Trust 15,000 Capital Securities at a price equal to
$1,000 per Capital Security (the "Purchase Price") and the Trust agrees to sell
such number of Capital Securities with a liquidation amount of $1,000 per
Capital Security to the Purchaser for the Purchase Price. The rights and
preferences of the Capital Securities will be set forth in the Declaration in
form and substance reasonably acceptable to the Purchaser. The Purchase Price is
payable by the Purchaser on the Closing Date in immediately available funds to
the account designated by LaSalle Bank National Association.

     1.2 The certificate for the Capital Securities shall be delivered in
definitive form by the Trust on the Closing Date (as defined in the Declaration)
to the Purchaser or its designee, and

(7) Independent Bank Corp.


shall be registered in the name of the Purchaser and shall represent the
aggregate liquidation amount of the Capital Securities being purchased by the
Purchaser.

     1.3 The Purchaser acknowledges and the Offerors agree that they will not
register any transfer of the Capital Securities not made in accordance with
Regulation S, pursuant to registration under the Securities Act of 1933, as
amended (the "Securities Act"), or pursuant to an available exemption from
registration.

     1.4 The Placement Agreement, dated October 12, 2006 (the "Placement
Agreement"), among the Offerors and the Placement Agent identified therein
includes certain representations and warranties, covenants and conditions to
closing and certain other matters governing the issuance and sale of the Capital
Securities by the Trust to the Purchaser. Each of the provisions of the
Placement Agreement, including the definitions therein, are hereby incorporated
by reference into this Purchase Agreement. In addition, to the extent provided
for in the Placement Agreement, the Purchaser shall be entitled to the benefits
of the Placement Agreement and shall be entitled to enforce such obligations of
the Offerors under the Placement Agreement as fully as if the Purchaser were a
party to such Placement Agreement, it being agreed between the parties that any
and all representations made by the Offerors to the Placement Agent in the
Placement Agreement shall be deemed to have also been made to the Purchaser.

     1.5 If any condition specified herein or in the Placement Agreement shall
not have been fulfilled when and as required to be fulfilled by, on behalf of or
in respect of the Offerors or the Capital Securities, this Purchase Agreement
may be terminated by the Purchaser by notice to the Offerors at any time at or
prior to the Closing Date, and such termination shall be without liability of
any party to any other party except that Sections 3, 9, 10 and 15 of the
Placement Agreement shall survive any such termination and remain in full force
and effect.

     1.6 Subject to the provisions of Article 2 hereof, the Purchaser may resell
the Preferred Securities to a subsequent purchaser either individually or on
behalf of a collateralized debt obligation investor ("CDO Investor") that is
sponsored or advised by such subsequent purchaser (any such purchaser from the
Purchaser and related CDO Investors are referred to hereinafter as a "Subsequent
Purchaser"). Upon transfer of the Preferred Securities to a Subsequent
Purchaser, the Subsequent Purchaser shall be entitled to each of the benefits of
the Placement Agent and the Purchaser under the Placement Agreement and this
Agreement, and shall be entitled to enforce the obligations of the Offerors
under the Placement Agreement and this Agreement, as fully as if the Subsequent
Purchaser were a party to the Placement Agreement and this Agreement.

                                    ARTICLE 2

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

     2.1 The Purchaser understands and acknowledges that none of the Capital
Securities, the Debentures or the Guarantee have been registered under the
Securities Act, or any other applicable securities laws, and are being offered
for sale by the Trust in a transaction not requiring registration under the
Securities Act, and the Capital Securities may not be offered, sold, pledged or
otherwise transferred by the Purchaser except in compliance with the


                                       -2-



registration requirements of the Securities Act, or any other applicable
securities laws, pursuant to an exemption therefrom or in a transaction not
subject thereto.

     2.2 The Purchaser represents and warrants that it is purchasing the Capital
Securities for its own account, for investment and not with a view to, or for
offer or sale in connection with, any distribution thereof in violation of the
Securities Act or other applicable securities laws, subject to any requirement
of law that the disposition of its property be at all times within its control
and subject to its ability to resell such Capital Securities pursuant to an
effective registration statement under the Securities Act or under Rules 144A
and 902 under the Securities Act or any other exemption from registration
available under the Securities Act, and the Purchaser agrees to the legends and
transfer restrictions applicable to the Capital Securities contained in the
Declaration. The Purchaser represents that it is an accredited investor within
the meaning of Regulation D under the Securities Act. The Purchaser represents
and warrants that the office or offices of the Purchaser in which its investment
decision was made is located at the address set forth in Section 3.1 hereof.

     2.3 The Purchaser has full power and authority to execute and deliver this
Purchase Agreement, to make the representations and warranties specified herein,
and to consummate the transactions contemplated herein and it has full right and
power to subscribe for the Capital Securities and perform its obligations
pursuant to this Purchase Agreement.

     2.4 The Purchaser believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the Capital
Securities. The Purchaser further represents that it has had an opportunity to
ask questions and receive answers from the Offerors regarding the terms and
conditions of the offering of the Capital Securities and the business,
properties, prospects and financial condition of the Offerors.

     2.5 No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any governmental body, agency or court
having jurisdiction over the Purchaser, other than those that have been made or
obtained, is necessary or required for the performance by the Purchaser of its
obligations under this Purchase Agreement or to consummate the transactions
contemplated herein.

     2.6 This Purchase Agreement has been duly authorized, executed and
delivered by the Purchaser.

     2.7 The Purchaser is not in violation of or default under any term of its
Memorandum of Association or Articles of Association, of any provision of any
mortgage, indenture, contract, agreement, instrument or contract to which it is
a party or by which it is bound or of any judgment, decree, order, writ or, any
statute, rule or regulation applicable to the Purchaser which would prevent the
Purchaser from performing any material obligation set forth in this Purchase
Agreement. The execution, delivery and performance of and compliance with this
Purchase Agreement, and the consummation of the transactions contemplated
herein, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute a
default under any such term, or the suspension, revocation, impairment,
forfeiture or non-renewal of any permit, license, authorization or approval
applicable to the Purchaser, its business or operations or any of its assets or
properties which


                                       -3-



would prevent the Purchaser from performing any material obligations set forth
in this Purchase Agreement.

     2.8 The Purchaser understands and acknowledges that the Company will rely
upon the truth and accuracy of the foregoing acknowledgments, representations,
warranties and agreements and agrees that, if any of the acknowledgments,
representations, warranties or agreements deemed to have been made by it by its
purchase of the Capital Securities are no longer accurate, it shall promptly
notify the Company.

     2.9 The Purchaser understands that no public market exists for any of the
Capital Securities, and that it is unlikely that a public market will ever exist
for the Capital Securities.

                                    ARTICLE 3

                                  MISCELLANEOUS

     3.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier, or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:

     To the Offerors:  Independent Bank Corp.
                       288 Union Street
                       Rockland, Massachusetts 02370
                       Attention: George Lamb
                       Telephone: (781) 982-6879
                       Fax: (781) 982-6591

     To the Purchaser: Wells Fargo Bank National Association as Trustee for
                       Alesco Preferred Funding XIII, Ltd.
                       919 Market Street, Suite 700
                       Wilmington, Delaware 19801
                       Attention: Corporate Trust Division
                       Telephone: (302) 575-2005
                       Fax: (302) 575-2006

     With a copy to:   Alesco Preferred Funding XIII, Ltd.
                       Walker House
                       Mary Street
                       P.O. Box 908GT
                       George Town
                       Cayman Islands
                       Attention: The Directors
                       Telephone: 1 (345) 945-3727
                       Fax: 1 (345) 945-4757


                                       -4-



     Unless otherwise expressly provided herein, notices shall be deemed to have
been given when received.

     3.2 This Purchase Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged.

     3.3 Upon the execution and delivery of this Purchase Agreement by the
parties hereto, this Purchase Agreement shall become a binding obligation of
each such party with respect to the matters covered herein, including those
incorporated by reference from the Placement Agreement.

     3.4 NOTWITHSTANDING THE PLACE WHERE THIS PURCHASE AGREEMENT MAY BE EXECUTED
BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE TRUST, PURCHASER AND THE COMPANY, ON
BEHALF OF ITSELF AND ITS SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, THE
TRUST), HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL
AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY
SUIT, ACTION OR PROCEEDING RELATED TO THIS PURCHASE AGREEMENT OR ANY OF THE
MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL
JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH OF THE
TRUST, PURCHASER AND THE COMPANY, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES
(INCLUDING, WITHOUT LIMITATION, THE TRUST), IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

     3.5 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Purchase
Agreement.

     3.6 This Purchase Agreement may be executed in one or more counterparts
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.

     3.7 This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, except as herein contained. No course of
conduct or dealing shall be construed to modify, amend or otherwise affect any
of the provisions hereof.


                                       -5-



     IN WITNESS WHEREOF, this Purchase Agreement is agreed to and accepted as of
the day and year first written above.

                                        INDEPENDENT BANK CORP.


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        INDEPENDENT CAPITAL TRUST V
                                        BY INDEPENDENT BANK CORP., AS SPONSOR


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

(7)  Independent Bank Corp.


                                       -6-



     IN WITNESS WHEREOF, this Purchase Agreement is agreed to and accepted as of
the day and year first written above.

                                        ALESCO PREFERRED FUNDING XIII, LTD.


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

(7)  Independent Bank Corp.


                                       -7-


                      CAPITAL SECURITIES PURCHASE AGREEMENT

                                October 12, 2006

     THIS CAPITAL SECURITIES PURCHASE AGREEMENT (this "Purchase Agreement") is
made among Independent Capital Trust V, a statutory trust created under the laws
of the State of Delaware (the "Trust"), Independent Bank Corp. (the "Company"
and, collectively with the Trust, the "Offerors") and Alesco Preferred Funding
XIV, Ltd. (the "Purchaser").

                                    RECITALS:

     A. The Trust desires to issue 50,000 of its TP Securities (the "Capital
Securities"), with a liquidation amount of $1,000 per Capital Security,
representing undivided beneficial interests in the assets of the Trust (the
"Offering"), to be issued pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), by the Company, as Sponsor, LaSalle Bank National
Association, as Institutional Trustee, and Christiana Bank & Trust Company, as
Delaware Trustee, the Administrators named therein, and the holders, from time
to time, of the Capital Securities, which Capital Securities are to be
guaranteed by the Company with respect to distributions and payments upon
liquidation, redemption and otherwise to the extent provided in and pursuant to
the terms of a Guarantee Agreement between the Company and LaSalle Bank National
Association, as Guarantee Trustee (the "Guarantee"); and

     B. The proceeds from the sale of the Capital Securities will be combined
with the proceeds from the sale of the Common Securities by the Trust to the
Company and will be used by the Trust to purchase an equivalent aggregate
principal amount of Junior Subordinated Debt Securities due March 15, 2037 of
the Company (the "Debentures"), to be issued by the Company pursuant to an
Indenture to be executed by the Company, as Issuer, and LaSalle Bank National
Association, as Debenture Trustee (the "Indenture"); and

     C. In consideration of the premises and the mutual representations and
covenants hereinafter set forth, the parties hereto agree as follows:

                                    ARTICLE 1

                     PURCHASE AND SALE OF CAPITAL SECURITIES

     1.1 Upon the execution of this Purchase Agreement, the Purchaser hereby
agrees to purchase from the Trust 23,200 Capital Securities at a price equal to
$1,000 per Capital Security (the "Purchase Price") and the Trust agrees to sell
such number of Capital Securities with a liquidation amount of $1,000 per
Capital Security to the Purchaser for the Purchase Price. The rights and
preferences of the Capital Securities will be set forth in the Declaration in
form and substance reasonably acceptable to the Purchaser. The Purchase Price is
payable by the Purchaser on the Closing Date in immediately available funds to
the account designated by LaSalle Bank National Association.

     1.2 The certificate for the Capital Securities shall be delivered in
definitive form by the Trust on the Closing Date (as defined in the Declaration)
to the Purchaser or its designee, and

(7) Independent Bank Corp.


                                       -6-



shall be registered in the name of the Purchaser and shall represent the
aggregate liquidation amount of the Capital Securities being purchased by the
Purchaser.

     1.3 The Purchaser acknowledges and the Offerors agree that they will not
register any transfer of the Capital Securities not made in accordance with
Regulation S, pursuant to registration under the Securities Act of 1933, as
amended (the "Securities Act"), or pursuant to an available exemption from
registration.

     1.4 The Placement Agreement, dated October 12, 2006 (the "Placement
Agreement"), among the Offerors and the Placement Agent identified therein
includes certain representations and warranties, covenants and conditions to
closing and certain other matters governing the issuance and sale of the Capital
Securities by the Trust to the Purchaser. Each of the provisions of the
Placement Agreement, including the definitions therein, are hereby incorporated
by reference into this Purchase Agreement. In addition, to the extent provided
for in the Placement Agreement, the Purchaser shall be entitled to the benefits
of the Placement Agreement and shall be entitled to enforce such obligations of
the Offerors under the Placement Agreement as fully as if the Purchaser were a
party to such Placement Agreement, it being agreed between the parties that any
and all representations made by the Offerors to the Placement Agent in the
Placement Agreement shall be deemed to have also been made to the Purchaser.

     1.5 If any condition specified herein or in the Placement Agreement shall
not have been fulfilled when and as required to be fulfilled by, on behalf of or
in respect of the Offerors or the Capital Securities, this Purchase Agreement
may be terminated by the Purchaser by notice to the Offerors at any time at or
prior to the Closing Date, and such termination shall be without liability of
any party to any other party except that Sections 3, 9, 10 and 15 of the
Placement Agreement shall survive any such termination and remain in full force
and effect.

     1.6 Subject to the provisions of Article 2 hereof, the Purchaser may resell
the Preferred Securities to a subsequent purchaser either individually or on
behalf of a collateralized debt obligation investor ("CDO Investor") that is
sponsored or advised by such subsequent purchaser (any such purchaser from the
Purchaser and related CDO Investors are referred to hereinafter as a "Subsequent
Purchaser"). Upon transfer of the Preferred Securities to a Subsequent
Purchaser, the Subsequent Purchaser shall be entitled to each of the benefits of
the Placement Agent and the Purchaser under the Placement Agreement and this
Agreement, and shall be entitled to enforce the obligations of the Offerors
under the Placement Agreement and this Agreement, as fully as if the Subsequent
Purchaser were a party to the Placement Agreement and this Agreement.

                                    ARTICLE 2

                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

     2.1 The Purchaser understands and acknowledges that none of the Capital
Securities, the Debentures or the Guarantee have been registered under the
Securities Act, or any other applicable securities laws, and are being offered
for sale by the Trust in a transaction not requiring registration under the
Securities Act, and the Capital Securities may not be offered, sold, pledged or
otherwise transferred by the Purchaser except in compliance with the

(7) Independent Bank Corp.


                                       -7-



registration requirements of the Securities Act, or any other applicable
securities laws, pursuant to an exemption therefrom or in a transaction not
subject thereto.

     2.2 The Purchaser represents and warrants that it is purchasing the Capital
Securities for its own account, for investment and not with a view to, or for
offer or sale in connection with, any distribution thereof in violation of the
Securities Act or other applicable securities laws, subject to any requirement
of law that the disposition of its property be at all times within its control
and subject to its ability to resell such Capital Securities pursuant to an
effective registration statement under the Securities Act or under Rules 144A
and 902 under the Securities Act or any other exemption from registration
available under the Securities Act, and the Purchaser agrees to the legends and
transfer restrictions applicable to the Capital Securities contained in the
Declaration. The Purchaser represents that it is an accredited investor within
the meaning of Regulation D under the Securities Act. The Purchaser represents
and warrants that the office or offices of the Purchaser in which its investment
decision was made is located at the address set forth in Section 3.1 hereof.

     2.3 The Purchaser has full power and authority to execute and deliver this
Purchase Agreement, to make the representations and warranties specified herein,
and to consummate the transactions contemplated herein and it has full right and
power to subscribe for the Capital Securities and perform its obligations
pursuant to this Purchase Agreement.

     2.4 The Purchaser believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the Capital
Securities. The Purchaser further represents that it has had an opportunity to
ask questions and receive answers from the Offerors regarding the terms and
conditions of the offering of the Capital Securities and the business,
properties, prospects and financial condition of the Offerors.

     2.5 No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any governmental body, agency or court
having jurisdiction over the Purchaser, other than those that have been made or
obtained, is necessary or required for the performance by the Purchaser of its
obligations under this Purchase Agreement or to consummate the transactions
contemplated herein.

     2.6 This Purchase Agreement has been duly authorized, executed and
delivered by the Purchaser.

     2.7 The Purchaser is not in violation of or default under any term of its
Memorandum of Association or Articles of Association, of any provision of any
mortgage, indenture, contract, agreement, instrument or contract to which it is
a party or by which it is bound or of any judgment, decree, order, writ or, any
statute, rule or regulation applicable to the Purchaser which would prevent the
Purchaser from performing any material obligation set forth in this Purchase
Agreement. The execution, delivery and performance of and compliance with this
Purchase Agreement, and the consummation of the transactions contemplated
herein, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute a
default under any such term, or the suspension, revocation, impairment,
forfeiture or non-renewal of any permit, license, authorization or approval
applicable to the Purchaser, its business or operations or any of its assets or
properties which

(7) Independent Bank Corp.


                                       -8-



would prevent the Purchaser from performing any material obligations set forth
in this Purchase Agreement.

     2.8 The Purchaser understands and acknowledges that the Company will rely
upon the truth and accuracy of the foregoing acknowledgments, representations,
warranties and agreements and agrees that, if any of the acknowledgments,
representations, warranties or agreements deemed to have been made by it by its
purchase of the Capital Securities are no longer accurate, it shall promptly
notify the Company.

     2.9 The Purchaser understands that no public market exists for any of the
Capital Securities, and that it is unlikely that a public market will ever exist
for the Capital Securities.

                                    ARTICLE 3

                                  MISCELLANEOUS

     3.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier, or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:

     To the Offerors:  Independent Bank Corp.
                       288 Union Street
                       Rockland, Massachusetts 02370
                       Attention: George Lamb
                       Telephone: (781) 982-6879
                       Fax: (781) 982-6591

     To the Purchaser: Alesco Preferred Funding XIV, Ltd.
                       c/o Embassy & Co.
                       One Federal Street, 3rd Floor
                       Boston, Massachusetts 02110
                       Attention: Amy Byrnes
                       Telephone: (617) 603-6480
                       Fax: (866) 856-3442

     With a copy to:   Alesco Preferred Funding XIV, Ltd.
                       Walker House
                       Mary Street
                       P.O. Box 908GT
                       George Town
                       Cayman Islands
                       Attention: The Directors
                       Telephone: 1 (345) 945-3727
                       Fax: 1 (345) 945-4757

(7) Independent Bank Corp.


                                       -9-



     Unless otherwise expressly provided herein, notices shall be deemed to have
been given when received.

     3.2 This Purchase Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged.

     3.3 Upon the execution and delivery of this Purchase Agreement by the
parties hereto, this Purchase Agreement shall become a binding obligation of
each such party with respect to the matters covered herein, including those
incorporated by reference from the Placement Agreement.

     3.4 NOTWITHSTANDING THE PLACE WHERE THIS PURCHASE AGREEMENT MAY BE EXECUTED
BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE TRUST, PURCHASER AND THE COMPANY, ON
BEHALF OF ITSELF AND ITS SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, THE
TRUST), HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL
AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY
SUIT, ACTION OR PROCEEDING RELATED TO THIS PURCHASE AGREEMENT OR ANY OF THE
MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL
JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH OF THE
TRUST, PURCHASER AND THE COMPANY, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES
(INCLUDING, WITHOUT LIMITATION, THE TRUST), IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

     3.5 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Purchase
Agreement.

     3.6 This Purchase Agreement may be executed in one or more counterparts
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.

     3.7 This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, except as herein contained. No course of
conduct or dealing shall be construed to modify, amend or otherwise affect any
of the provisions hereof.

(7) Independent Bank Corp.


                                      -10-



     IN WITNESS WHEREOF, this Purchase Agreement is agreed to and accepted as of
the day and year first written above.

                                        INDEPENDENT BANK CORP.


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        INDEPENDENT CAPITAL TRUST V
                                        BY INDEPENDENT BANK CORP., AS SPONSOR


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

(7) Independent Bank Corp.


                                      -11-



     IN WITNESS WHEREOF, this Purchase Agreement is agreed to and accepted as of
the day and year first written above.

                                        ALESCO PREFERRED FUNDING XIV, LTD.


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

(7) Independent Bank Corp.


                                      -12-

EX-10.18

                                                                   Exhibit 10.18

                              ALLOCATION AGREEMENT
                         NEW MARKETS TAX CREDIT PROGRAM
               COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND

                                                  
ALLOCATEE: ROCKLAND TRUST COMMUNITY                  NMTC PROGRAM CONTROL NUMBER: 06NMA002322
DEVELOPMENT CORPORATION II
                                                     EMPLOYER IDENTIFICATION NUMBER: 841688578

ADDRESS:
288 Union Street
Rockland, MA 02370-1803

DATE OF APPLICABLE NOTICE OF ALLOCATION AUTHORITY:   DATE OF NOTICE OF ALLOCATION:
July 15, 2005 and as amended March 10, 2006          April 28, 2006

ALLOCATEE'S FISCAL YEAR END: December 31

NMTC ALLOCATION AMOUNT: $45,000,000



By signing this Allocation Agreement and in consideration of the mutual
covenants, conditions and agreements hereinafter set forth, the parties hereto,
by their respective Authorized Representatives, agree that the NMTC Allocation
provided hereunder shall be administered pursuant to the Organization Specific
Terms and Conditions attached hereto as Schedule 1 and the General Allocation
Terms and Conditions, attached hereto as Schedule 2, and made a material part
hereof.

                                                  
COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND    ROCKLAND TRUST COMMUNITY DEVELOPMENT CORPORATION II


By:                                                  By:
    ----------------------------------------------       -----------------------------------------------
Authorized Representative: Linda G. Davenport        Authorized Representative: Edward Seksay
Title: Deputy Director for Policy and Programs       Title: General Counsel

NMTC ALLOCATION EFFECTIVE DATE:
                                ------------------



THIS ALLOCATION AGREEMENT COMPRISES:

SCHEDULE 1 - ORGANIZATION SPECIFIC TERMS AND CONDITIONS

SCHEDULE 2 - GENERAL ALLOCATION TERMS AND CONDITIONS

SCHEDULE 3 - OPINION OF COUNSEL



                                                                      SCHEDULE 1
                  ALLOCATEE: ROCKLAND TRUST COMMUNITY DEVELOPMENT CORPORATION II
                                                        CONTROL NO.: 06NMA002322

                                   ----------

                         NEW MARKETS TAX CREDIT PROGRAM
                   ORGANIZATION SPECIFIC TERMS AND CONDITIONS

                                   ----------



                                                                      SCHEDULE 1
                  ALLOCATEE: ROCKLAND TRUST COMMUNITY DEVELOPMENT CORPORATION II
                                                        CONTROL NO.: 06NMA002322

THE PROVISIONS SET FORTH BELOW CORRESPOND TO THE SPECIFIED SECTIONS IN SCHEDULE
2 (GENERAL ALLOCATION TERMS AND CONDITIONS) OF THIS ALLOCATION AGREEMENT.

SECTION 3.2(A): ELIGIBLE ACTIVITIES

                                                                           
Investments in, or loans to, non-real estate QALICBs:                          X

Investments in, or loans to, QALICBs whose principal activities involve the
development or rehabilitation of real estate:                                  X

Investments in, or loans to, other CDEs:                                       X

Purchase of loans from other CDEs:

Financial Counseling and Other Services:                                       X



SECTION 3.2(B):  SERVICE AREA



STATE   STATE FIPS         COUNTY        COUNTY FIPS
- -----   ----------   -----------------   -----------
                                
MA          25       Barnstable County      25001
MA          25       Bristol County         25005
MA          25       Dukes County           25007
MA          25       Nantucket County       25019
MA          25       Norfolk County         25021
MA          25       Plymouth County        25023
RI          44       Entire State           44000


SECTION 3.2(C): SUBSIDIARY ALLOCATEES

     Not Applicable


                                        2



                                                                      SCHEDULE 1
                  ALLOCATEE: ROCKLAND TRUST COMMUNITY DEVELOPMENT CORPORATION II
                                                        CONTROL NO.: 06NMA002322

SECTION 3.2(D): UNRELATED ACTIVITIES

Unrelated Activities Clause:              [X] Applicable   [ ] Not Applicable

SECTION 3.2(F): FLEXIBLE PRODUCTS

Flexible Products Clause:                 [X] Applicable   [ ] Not Applicable

SECTION 3.2(G): REQUIRED TRANSACTIONS

     Not Applicable

SECTION 3.2(H): TARGETED DISTRESSED COMMUNITIES

Targeted Distressed Communities Clause:   [X] Applicable   [ ] Not Applicable

SECTION 3.2(I): LOAN PURCHASES INVESTMENT

     Not Applicable

SECTION 3.2(J): QUALIFIED EQUITY INVESTMENT USAGE

Qualified Equity Investment Usage Percentage: 95%

SECTION 3.3(B): RESTRICTIONS

Restrictions Clause:                      [ ] Applicable   [X] Not Applicable


                                        3


                                                                      SCHEDULE 2
                  ALLOCATEE: ROCKLAND TRUST COMMUNITY DEVELOPMENT CORPORATION II
                                                        CONTROL NO.: 06NMA002322

                                   ----------

                         NEW MARKETS TAX CREDIT PROGRAM
                     GENERAL ALLOCATION TERMS AND CONDITIONS

                                   ----------



                                TABLE OF CONTENTS



                                                                            Page
                                                                            ----
                                                                         
I.    Incorporation by Reference ........................................     1

II.   Definitions .......................................................     1
      2.1  Act ..........................................................     1
      2.2  Affiliate ....................................................     1
      2.3  Allocation Agreement .........................................     1
      2.4  Allocation Application .......................................     1
      2.5  Allocation Date ..............................................     1
      2.6  Control ......................................................     2
      2.7  Equity Investment ............................................     2
      2.8  Financial Counseling and Other Services ......................     2
      2.9  Gulf Opportunity Zone ........................................     2
      2.10 Low-Income Community .........................................     2
      2.11 Metropolitan Area ............................................     2
      2.12 NMTC Allocation ..............................................     2
      2.13 NMTC Program .................................................     3
      2.14 NMTC Program Income Tax Regulations ..........................     3
      2.15 Notice of Allocation .........................................     3
      2.16 Qualified Active Low-Income Community Business ...............     3
      2.17 Qualified Community Development Entity .......................     3
      2.18 Qualified Equity Investment ..................................     3
      2.19 Qualified Low-Income Community Investment ....................     3
      2.20 Reinvestment .................................................     3
      2.21 Repayment ....................................................     3
      2.22 Service Area .................................................     3
      2.23 Subsidiary ...................................................     4
      2.24 Subsidiary Allocatee .........................................     4
      2.25 Targeted Population ..........................................     4
      2.26 Voting Securities ............................................     4

III.  The NMTC Allocation ...............................................     5
      3.1  NMTC Allocation ..............................................     5
      3.2  Authorized Uses of NMTC Allocation ...........................     5
      3.3  Restrictions on the Use of NMTC Allocation ...................     9
      3.4  Availability of NMTC Allocation ..............................    10
      3.5  Notice to Taxpayers of Qualified Equity Investment ...........    10

IV.   Representations and Warranties ....................................    11
      4.1  Organization, Standing and Powers ............................    11
      4.2  Qualification ................................................    11
      4.3  Authorization; Consents ......................................    11



                                        i



                                                                         
      4.4  Execution and Delivery; Binding Agreement ....................    11
      4.5  No Conflicts .................................................    11
      4.6  Litigation ...................................................    12
      4.7  Compliance with Other Instruments ............................    12
      4.8  Disclosure ...................................................    12
      4.9  Taxes; Debts; Bankruptcy .....................................    12
      4.10 Debarment, Suspension and Other Responsibility Matters .......    12
      4.11 Status as a CDE ..............................................    13

V.    Conditions Precedent to NMTC Allocation ...........................    13
      5.1  Performance ..................................................    13
      5.2  Opinion of Allocatee Counsel .................................    13
      5.3  Representations and Warranties ...............................    13
      5.4  Proceedings and Documents ....................................    13

VI.   Covenants and Agreements of the Allocatee .........................    13
      6.1  Compliance with Government Requirements ......................    13
      6.2  Fraud, Waste, and Abuse ......................................    14
      6.3  Right to Inspect and Audit ...................................    14
      6.4  Retention of Records .........................................    14
      6.5  Reports ......................................................    15
      6.6  Equal Credit Opportunity Act .................................    16
      6.7  Use of Allocation ............................................    16
      6.8  Maintain Existence as a CDE ..................................    16
      6.9  Advise the Fund of Certain Material Events ...................    16
      6.10 Disclosure to Potential Investors ............................    17
      6.11 Common Enterprises ...........................................    18

VII.  Monitoring Fee ....................................................    18
      7.1  Monitoring/Compliance Fee ....................................    18

VIII. Events of Default, Events of Recapture and Remedies ...............    18
      8.1  Events of Default ............................................    18
      8.2  Events of Recapture ..........................................    19
      8.3  Remedies .....................................................    19
      8.4  Referral to IRS ..............................................    20
      8.5  No Waiver ....................................................    20
      8.6  Prior Notice to Allocatee of Sanctions .......................    20
      8.7  Joint and Several Liability ..................................    21

IX.   Miscellaneous .....................................................    21
      9.1  Notices ......................................................    21




                                       ii



                                                                         
      9.2  Entire Agreement .............................................    22
      9.3  Assignment ...................................................    22
      9.4  Successors ...................................................    22
      9.5  Severability .................................................    22
      9.6  No Waiver ....................................................    22
      9.7  Applicable Law ...............................................    22
      9.8  Disclaimer of Relationships ..................................    22
      9.9  Counterparts .................................................    23
      9.10 Headings .....................................................    23
      9.11 Amendments ...................................................    23
      9.12 Survival of Representations and Warranties ...................    23
      9.13 Termination ..................................................    23
      9.14 Disclosure of Allocatee Reports by Fund ......................    24
      9.15 Compliance with Non-Discrimination Statutes ..................    24




                                       iii


                                    ARTICLE I
                           INCORPORATION BY REFERENCE

     26 C.F.R. Part 1, section 1.45D-1, as from time to time amended, the Act
(as hereinafter defined), and any regulations for the NMTC Program which may be
later promulgated by the Fund, are incorporated by reference and given the same
force and effect as if set out in full text herein. In the event of any
inconsistency between 26 C.F.R. Part 1, section 1.45D-1, the Act, or any
applicable Fund regulations and the terms of this Allocation Agreement, and any
amendments thereto, the provisions of 26 C.F.R. Part 1, section 1.45D-1, the
Act, and the applicable Fund regulations shall govern.

                                   ARTICLE II
                                   DEFINITIONS

     When used in this Allocation Agreement, the following terms shall have the
meanings specified below. Capitalized terms used but not defined herein shall
have the respective meanings assigned to them in the Act and/or the NMTC Program
Income Tax Regulations (as hereinafter defined).

2.1 Act. "Act" shall mean Section 121 of the Community Renewal Tax Relief Act of
2000, which includes Section 45D of the Internal Revenue Code (IRC) as enacted
by section 1 (a)(7) of the Consolidated Appropriations Act, 2001, Pub. L. No.
106-554 (December 21, 2000).

2.2 Affiliate. "Affiliate" shall mean any legal entity that Controls, is
Controlled by, or is under common Control with the Allocatee.

2.3 Allocation Agreement. "Allocation Agreement" or "Agreement" shall mean this
NMTC Program Allocation Agreement between the Fund and the Allocatee and
Subsidiary Allocatee, as the case may be, including the Organization Specific
Terms and Conditions (Schedule 1) and the General Allocation Terms and
Conditions (Schedule 2) and any attachments hereto, as such Agreement may, from
time to time, be amended in accordance with its terms.

2.4 Allocation Application. "Allocation Application" or "Application" shall mean
the NMTC Program Application Form, together with any permitted attachments
submitted (either in electronic or hard-copy format) by the Allocatee to the
Fund, in response to the Notice of Allocation Availability (NOAA) inviting
applications for the NMTC Program that was published in the Federal Register on
July 15, 2005 and as amended March 10, 2006.

2.5 Allocation Date. "Allocation Date" shall mean the date, as determined by the
Fund, that the Allocatee has returned to the Fund an executed copy of this
Allocation Agreement along with an acceptable opinion of counsel as set forth in
Attachment A attached hereto. Once the Fund has determined the Allocation Date,
the Fund will insert such date on the signature page of the



Allocation Agreement and provide the Allocatee with notification of the
Allocation Date and a copy of the signature page.

2.6 Control. "Control" shall mean:

     (a) Ownership, control, or power to vote more than 50 percent of the
     outstanding shares of any class of Voting Securities of any entity,
     directly or indirectly or acting through one or more other persons;

     (b) Control in any manner over the election of a majority of the directors,
     trustees, general partners, managing members, managers (or individuals
     exercising similar functions) of any other entity; or

     (c) Power to exercise, directly or indirectly, a controlling influence over
     the management policies or investment decisions of another entity, as
     determined by the Fund.

For purposes of this Allocation Agreement, the term "Control" does not include
an investor's contractual right to remove a general partner, managing member, or
manager of an Allocatee for cause.

2.7 Equity Investment. "Equity Investment" shall mean pursuant to IRC Section
45D(b)(6) and 26 C.F.R. 1.45D-1(c)(2), any stock (other than nonqualified
preferred stock as defined in IRC Section 351(g)(2)) in an entity that is a
corporation and any capital interest in an entity that is a partnership for
federal tax purposes.

2.8 Financial Counseling and Other Services. "Financial Counseling and Other
Services" shall mean, pursuant to 26 C.F.R. 1.45D-1(d)(7), advice provided by a
Qualified Community Development Entity relating to the organization or
operation of a trade or business.

2.9 Gulf Opportunity Zone. "Gulf Opportunity Zone" or "GO Zone" shall mean that
portion of the Hurricane Katrina disaster area determined by the President to
warrant individual or individual and public assistance from the Federal
Government under the Robert T. Stafford Disaster Relief and Emergency Assistance
Act by reason of Hurricane Katrina. The Hurricane Katrina disaster area is an
area with respect to which a major disaster has been declared by the President
before September 14, 2005, under section 401 of the Gulf Opportunity Zone Act of
2005 (Pub. L. 109-135) by reason of Hurricane Katrina.

2.10 Low-Income Community. "Low-Income Community" shall mean any area as defined
in accordance with IRC Section 45D(e).

2.11 Metropolitan Area. "Metropolitan Area" shall mean an area designated as
such by the Office of Management and Budget pursuant to 44 U.S.C. 3504(e) and 31
U.S.C. 1104(d) and Executive Order 10253 (3 CFR 1949-1953 Comp., p.758), as
amended.

2.12 NMTC Allocation. "NMTC Allocation" shall mean an allocation of tax credit
authority pursuant to the NMTC Program.


                                        2



2.13 NMTC Program. "NMTC Program" shall mean the program authorized by the Act
and implemented pursuant to guidance published by the Fund at 66 Federal
Register 21846 and 66 Federal Register 65806, the NMTC Program Income Tax
Regulations (as hereinafter defined) promulgated by the Internal Revenue
Service, and applicable Notice of Allocation Availability.

2.14 NMTC Program Income Tax Regulations. "NMTC Program Income Tax Regulations"
shall mean the regulations promulgated by the Internal Revenue Service at 26
C.F.R. 1.45D-1, together with any amendment or interpretation of those
regulations as may be promulgated by the Internal Revenue Service through
guidance published in the Internal Revenue Bulletin or the Federal Register,
which provide guidance for taxpayers claiming the New Markets Tax Credit under
IRC Section 45D.

2.15 Notice of Allocation. "Notice of Allocation" shall mean a notification to
the Allocatee from the Fund that informs the Allocatee that it has been approved
by the Fund to receive a NMTC Allocation subject to the terms and conditions set
forth in the Notice of Allocation.

2.16 Qualified Active Low-Income Community Business. "Qualified Active
Low-Income Community Business" or "QALICB" shall mean any corporation (including
a nonprofit corporation), partnership or other business that meets the
requirements set forth in IRC Section 45D(d)(2) and 26 C.F.R. 1.45D-1(d)(4).

2.17 Qualified Community Development Entity. "Qualified Community Development
Entity" or "CDE" shall mean any domestic corporation or partnership, for Federal
tax purposes, certified as a CDE by the Fund pursuant to IRC Section 45D(c).

2.18 Qualified Equity Investment. "Qualified Equity Investment" shall mean an
Equity Investment in a CDE that meets the requirements of IRC Section 45D(b) and
26 C.F.R. 1.45D-1(c).

2.19 Qualified Low-Income Community Investment. "Qualified Low-Income Community
Investment" or "QLICI" shall have the same meaning as set forth in IRC Section
45D(d) and 26 C.F.R. 1.45D-1(d).

2.20 Reinvestment. "Reinvestment" shall mean investment of QLICI Repayment(s)
into QLICIs.

2.21 Repayment. "Repayment" shall mean any QLICI equity capital or loan
principal returned or repaid to the Allocatee by a QLICI recipient.

2.22 Service Area. "Service Area" shall mean, for the purposes of this
Allocation Agreement, the geographic area encompassing Low-Income Communities in
which the Allocatee is authorized to make Qualified Low-Income Community
Investments using the proceeds of Qualified Equity Investments. The Allocatee's
authorized Service Area is set forth in Section 3.2(b) of this Allocation
Agreement.


                                        3



2.23 Subsidiary. "Subsidiary" shall mean any legal entity that is owned or
Controlled directly or indirectly by the Allocatee. This term includes series
funds, which are separate investment funds Controlled by the Allocatee.

2.24 Subsidiary Allocatee. "Subsidiary Allocatee" shall mean a Subsidiary of the
Allocatee to which the Fund has authorized the Allocatee to transfer all or a
portion of its NMTC Allocation, pursuant to Section 3.2(c) of this Allocation
Agreement. A Subsidiary Allocatee must be a CDE and must agree to abide by all
of the terms and conditions contained in this Allocation Agreement as such terms
and conditions apply to the Allocatee. In addition, the Allocatee must, at a
minimum, at all times maintain a controlling influence over the investment
decisions of the Subsidiary Allocatee.

2.25 Targeted Population. "Targeted Population," as defined in 12 U.S.C.
4702(20) and related CDFI Fund and IRS Guidance documents, shall mean
individuals, or an identifiable group of individuals, including an Indian tribe,
who (A) are low-income persons; or (B) otherwise lack adequate access to loans
or equity investments.

2.26 Voting Securities. "Voting Securities" shall mean (a) shares of common or
preferred stock, general or limited partnership shares or interests, or similar
interests if the shares or interest, by statute, charter, or in any manner,
entitle the holder:

     (i)  To vote for or select directors, trustees, or partners (or persons
          exercising similar functions of the issuing company); or

     (ii) To vote on or to direct the conduct of the operations or other
          significant policies of the issuing company.

     (b) Nonvoting shares. Preferred shares, limited partnership shares or
interests, or similar interests are not Voting Securities if:

     (i)  Any voting rights associated with the shares or interest are limited
          solely to the type customarily provided by statute with regard to
          matters that would significantly and adversely affect the rights or
          preference of the security or other interest, such as the issuance of
          additional amounts or classes of senior securities, the modification
          of the terms of the security or interest, the dissolution of the
          issuing company, or the payment of dividends by the issuing company
          when preferred dividends are in arrears;

     (ii) The shares or interest represent an essentially passive investment or
          financing device and do not otherwise provide the holder with Control
          over the issuing company; and


                                        4



     (iii) The shares or interest do not entitle the holder, by statute,
          charter, or in any manner, to select or to vote for the selection of
          directors, trustees, or partners (or persons exercising similar
          functions) of the issuing company.

                                   ARTICLE III
                               THE NMTC ALLOCATION

3.1 NMTC Allocation. Subject to all of the terms and conditions hereof and in
reliance upon all representations, warranties, assurances, certifications and
agreements contained herein, the Fund hereby agrees to allocate to the Allocatee
and the Allocatee hereby agrees to accept from the Fund an NMTC Allocation. The
amount of the NMTC Allocation represents the amount of Qualified Equity
Investments which may be issued by the Allocatee, and as to which NMTCs may be
claimed. If any of the conditions specified herein or in any document connected
herewith, including the Notice of Allocation, have not been fulfilled to the
satisfaction of the Fund, the Fund will, in its sole discretion, elect not to
effectuate the NMTC Allocation until such time as said conditions shall be
fulfilled to the satisfaction of the Fund. Once the Fund has determined that the
conditions required herein, including the Notice of Allocation, have been met
and the Allocatee has returned to the Fund an executed copy of the Allocation
Agreement along with an acceptable opinion of counsel, the Fund will set the
Allocation Date. This Allocation Agreement will be effective as of the
Allocation Date.

3.2  Authorized Uses of NMTC Allocation. The Allocatee shall use the proceeds of
     its NMTC Allocation to make investments or Reinvestments only as follows:

     (a)  At such time that the Allocatee has made 100 percent of its QLICIs or
          September 30, 2009, whichever date is earlier, and until the Allocatee
          redeems its first Qualified Equity Investment related to its NMTC
          Allocation, the Allocatee shall make at least 85 percent of its QLICIs
          (in terms of the aggregate dollar amount of the QLICIs) in the types
          of activities listed in Schedule 1 of this Allocation Agreement.

     (b)  At such time that the Allocatee has made 100 percent of its QLICIs or
          September 30, 2009, whichever date is earlier, and until the Allocatee
          redeems its first Qualified Equity Investment related to its NMTC
          Allocation, the Allocatee shall make at least 85 percent of its QLICIs
          (in terms of the aggregate dollar amount of the QLICIs) in the
          Service Area(s) listed in Schedule 1 of this Allocation Agreement.

     (c)  If applicable, the Allocatee may transfer all or part of its NMTC
          Allocation to the Subsidiary Allocatees listed in Schedule 1 of this
          Allocation Agreement.

     (d)  If applicable, as listed in Schedule 1 of this Allocation Agreement,
          the Allocatee shall satisfy the requirements of IRC Section
          45D(b)(1)(B) and 26 C.F.R. 1.45D- 1(c)(5) with respect to the
          Qualified Equity Investments it receives by making


                                        5



          QLICIs in businesses in which persons unrelated to the Allocatee hold
          the majority equity interest (as defined in IRC Section 45D(f)(2)(B)),
          and as determined subsequent to the Allocatee making the QLICI. The
          requirement of this Section 3.2(d) does not apply if an Allocatee
          becomes related to a business due to financial difficulties of the
          business that were unforeseen at the time the Allocatee made a QLICI
          in the business.

     (e)  By September 30, 2009, the Allocatee shall issue at least 60 percent
          of its Qualified Equity Investments related to its NMTC Allocation.

     (f)  If applicable, at such time that the Allocatee has made 100 percent of
          its QLICIs or September 30, 2009, whichever date is earlier, and until
          the Allocatee redeems its first Qualified Equity Investment related to
          its NMTC Allocation, the Allocatee shall demonstrate that QLICIs made
          in the form of loans to or investments in CDEs or QALICBs (as opposed
          to loan purchases or the provision of Financial Counseling and Other
          Services) incorporated terms and conditions that, at the time the
          QLICIs were made, were flexible, non-conventional, or non-conforming
          with reference to either the Allocatee's underwriting guidelines or
          standard practice in the marketplace as documented by the Allocatee.

          Specifically, the Allocatee must have made QLICIs that (a) are equity
          or equity-equivalent financing, (b) have interest rates that are at
          least 25 percent lower than the prevailing market rates for the
          particular product or at least 25 percent lower than the Applicant's
          current offerings for the particular product, or (c) meet at least
          three of the following criteria, provided nothing in this Allocation
          Agreement shall be construed to require the Allocatee to engage in
          unsafe or unsound underwriting practices:

               (i)  Debt with equity features (i.e., debt with royalties; debt
                    with warrants; convertible debt);

               (ii) Subordinated debt;

               (iii) Below market interest rates;

               (iv) Lower than standard origination fees;

               (v)  A longer than standard period of interest only loan
                    payments;

               (vi) Higher than standard loan to value ratio;

               (vii) A longer than standard amortization period;

               (viii) More flexible borrower credit standards;

               (ix) Nontraditional forms of collateral;

               (x)  Lower than standard debt service coverage ratio; or

               (xi) Loan loss reserve requirements that are less than standard.

          Furthermore, to the extent that the Allocatee makes QLICIs in the form
          of loans to or investments in CDEs ("Recipient CDEs"), the Allocatee
          shall require that the Recipient CDE makes loans to or investments in
          QALICBs that (a) are equity or equity-equivalent financing, (b) have
          interest rates that are at least 25 percent


                                        6



          lower than the prevailing market rates for the particular product or
          at least 25 percent lower than the CDE's current offerings for the
          particular product, or (c) meet at least three of criteria i-xi above.

     (g)  If applicable, the Allocatee shall use the proceeds of its Qualified
          Equity Investments minimally or solely to make QLICIs in the
          project(s) listed in Schedule 1 of this Allocation Agreement.

     (h)  If applicable, at such time that the Allocatee has made 100 percent of
          its QLICIs or September 30, 2009, whichever date is earlier, and until
          the Allocatee redeems its first Qualified Equity Investment related to
          its NMTC Allocation, the Allocatee shall have made at least 75 percent
          of the total dollar amount of its QLICIs in areas that are (1)
          characterized by at least one of items (i) - (iii) on the list below
          for each QLICI, (2) characterized by at least two of items (iv) -
          (xiv) on the list below for each QLICI, or (3) characterized by item
          (xv) on the list below as of the date the Allocatee closed the QLICI
          transaction:

               (i)  Census tracts with poverty rates greater than 30 percent;

               (ii) If located within a non-Metropolitan Area, median family
                    income does not exceed 60 percent of statewide median family
                    income or if located within a Metropolitan Area, median
                    family income does not exceed 60 percent of the greater of
                    statewide median family income or the Metropolitan Area
                    median family income;

               (iii) Census tracts with unemployment rates at least 1.5 times
                    the national average;

               (iv) Federally designated Empowerment Zones, Enterprise
                    Communities, or Renewal Communities;

               (v)  U.S. Small Business Administration (SBA) designated HUB
                    Zones, to the extent that the QLICIs will support businesses
                    that obtain HUB Zone certification from the SBA;

               (vi) Brownfield sites as defined under 42 U.S.C. 9601(39)

               (vii) Areas encompassed by a HOPE VI redevelopment plan;

               (viii) Federally designated as Native American or Alaskan Native
                    areas, Hawaiian Homelands, or redevelopment areas by the
                    appropriate Tribal or other authority;


                                        7



               (ix) Areas designated as distressed by the Appalachian Regional
                    Commission or Delta Regional Authority;

               (x)  Colonias areas as designated by the U.S. Department of
                    Housing and Urban Development;

               (xi) Federally designated medically underserved areas, to the
                    extent that QLICI activities will support health related
                    services;

               (xii) Located in a Hot Zone (defined as geographic areas
                    designated by the Fund as having greater levels of economic
                    distress);

               (xiii) High Migration Rural County (defined as any county which,
                    during the 20 year period ending with the year in which the
                    most recent census was conducted, has a net out-migration of
                    inhabitants from the county of at least 10 percent of the
                    population of the county at the beginning of such period.
                    See IRC Section 45D(e)(5));

               (xiv) State or local tax-increment financing districts,
                    enterprise zone programs, or other similar state/local
                    programs targeted towards particularly economically
                    distressed communities; or

               (xv) Counties for which the Federal Emergency Management Agency
                    (FEMA) has (a) issued a "major disaster declaration" since
                    July 15, 2005; and (b) made a determination that such County
                    is eligible for both "individual and public assistance;"
                    provided that, for areas not located within the GO Zone, the
                    initial project investment was made within 24 months of the
                    disaster declaration.

     Furthermore, to the extent that the Allocatee makes QLICIs in the form of
     loans to or investments in CDEs ("Recipient CDEs"), the Allocatee shall
     require that the Recipient CDE makes loans to or investments in QALICBs in
     areas that are (1) characterized by at least one of items (i) - (iii) on
     the list above for each loan or investment, (2) characterized by at least
     two of items (iv) - (xiv) on the list above for each loan or investment, or
     (3) characterized by item (xv) on the list above for each loan or
     investment.

(i)  If applicable, the Allocatee shall require CDEs from which it purchases
     loans to invest at least the designated percent of the proceeds of such
     loan sales, as listed in Schedule 1 of this Allocation Agreement, in the
     form of QLICIs.


                                        8


     (j)  If applicable, at such time that the Allocatee has issued 100 percent
          of its Qualified Equity Investments or September 30, 2009, whichever
          date is earlier, and until the Allocatee redeems its first Qualified
          Equity Investment related to its NMTC Allocation, the Allocatee shall
          use at least the designated percent of its Qualified Equity
          Investments (in terms of the aggregate dollar amount of the Qualified
          Equity Investments), as listed in Schedule 1 to this Allocation
          Agreement, to make QLICIs.

          To the extent that the Qualified Equity Investment finances loans to
          or investments in CDEs ("Recipient CDEs") that are not Affiliates of
          or Controlled by the Allocatee, the standard set forth above in this
          section 3.2(j) shall be applied only to Allocatee - not to the
          Recipient CDEs.

3.3  Restrictions on the Use of NMTC Allocation.

     (a)  The Allocatee shall not use its NMTC Allocation in a manner other than
          as authorized herein, unless the Allocatee consults with and obtains
          the prior written approval of the Fund, which approval shall not be
          unreasonably withheld.

     (b)  If applicable, the Allocatee shall use the proceeds of its Qualified
          Equity Investments as directed in Schedule 1 (with respect to this
          Section 3.3(b)) of this Allocation Agreement.

     (c)  The Allocatee shall not transfer any portion of a NMTC Allocation to
          any Subsidiary, except those Subsidiaries listed in Section 3.2(c) of
          this Allocation Agreement, without the Fund's prior written approval.

     (d)  Pursuant to IRC Section 45D(b)(2) and 26 C.F.R. 1.45D-1(c)(4)(ii),
          the Allocatee may not designate Equity Investments that it issues as
          Qualified Equity Investments in an amount that exceeds the total
          amount of its NMTC Allocation.

     (e)  Pursuant to IRC Section 45D(b)(1) and 26 C.F.R. 1.45D-1(c)(4)(i)(A),
          the Allocatee may not designate any Equity Investment that it issues
          as a Qualified Equity Investment if such investment is issued by the
          Allocatee more than five (5) years after the Allocation Date.

     (f)  Pursuant to 26 C.F.R. 1.45D-1(c)(4)(i)(B), the Allocatee may not
          designate an Equity Investment that it issues to another CDE as a
          Qualified Equity Investment if the CDE making the investment has
          received an NMTC Allocation.

     (g)  A taxpayer that makes a Qualified Equity Investment in the Allocatee
          may not receive a Bank Enterprise Award Program award in addition to
          NMTCs for making the same Equity Investment in the Allocatee.


                                        9



     (h)  The Allocatee may not use the proceeds of its Qualified Equity
          Investments to make loans to or investments in QALICBs whose principal
          business activity is the rental to others of real property unless the
          proceeds of the loan or investment are primarily used for: (1) costs
          in connection with new construction located on such property; (2)
          costs in connection with the substantial rehabilitation of such
          property; (3) costs in connection with the acquisition and substantial
          rehabilitation of such property; (4) acquisition costs in connection
          with new construction; or (5) take-out financing for a loan, equity
          investment, or other financing, the proceeds of which were used for
          items (1), (2), (3), and/or (4) of this paragraph. Except as provided
          in item (5) of this paragraph, the proceeds of such loans and
          investments may not be used to re-finance or otherwise pay off an
          existing loan on the property.

          The restriction of this Section 3.3(h) does not apply to any loan to
          or investment in a QALICB (the "first QALICB) that is controlled by
          (within the meaning of 26 C.F.R. 1.45D-1(d)(6)(ii)(B)) or under common
          control with another QALICB (the "second QALICB"), provided that: (1)
          the principal business activity of the second QALICB is not the rental
          to others of real property; and (2) the second QALICB will be the
          primary user of all of the real property owned by the first QALICB.

     (i)  The Allocatee shall use the NMTC Allocation as authorized in Section
          3.2 of this Allocation Agreement, but only to the extent that such
          uses are generally consistent with the strategies (including, but not
          limited to, the proposed product offerings and markets served) set
          forth in the Allocation Application.

3.4 Availability of NMTC Allocation. On or after the Allocation Date, the
Allocatee may designate Qualified Equity Investments as to which NMTCs may be
claimed with respect to Equity Investments made on or after that date. An
Allocatee may also designate as a Qualified Equity Investment such Equity
Investments in the Allocatee made pursuant to the requirements set forth in 26
C.F.R. 1.45D-1(c)(3)(ii)(B).

3.5 Notice to Taxpayers of Qualified Equity Investment. In accordance with 26
C.F.R. 1.45D-1(g)(2), the Allocatee shall provide notice to any taxpayer who
makes a Qualified Equity Investment in the Allocatee at its original issue that
the Equity Investment is a Qualified Equity Investment entitling the taxpayer to
claim a NMTC. The Allocatee shall provide such notice to the taxpayer no later
than 60 days after the date the taxpayer makes the Qualified Equity Investment
in the Allocatee. The notice shall contain the amount paid to the Allocatee for
the Qualified Equity Investment at its original issue and the taxpayer
identification number of the Allocatee.


                                       10



                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

As of Allocation Date, the Allocatee hereby represents and warrants to the Fund
the following:

4.1 Organization, Standing and Powers. The Allocatee is a domestic corporation
or partnership for Federal tax purposes. In addition, the Allocatee validly
exists and is in good standing (if applicable) under the laws of the State of
its formation, and has all requisite organizational power and authority to own
and operate its assets and properties, to carry on its business as it is now
being conducted and to carry out the authorized use(s) of the NMTC Allocation
provided hereunder.

4.2 Qualification. The Allocatee is duly qualified, in good standing (if
applicable) and authorized to transact business in each jurisdiction where the
conduct of the Allocatee's business, the carrying out of the authorized use(s)
of the NMTC Allocation to be provided hereunder or the ownership of its assets
and properties requires such qualification, or, if not so qualified, the
Allocatee's failure so to qualify shall not reasonably be expected to: (i) have
a material adverse effect on the financial condition or business operations of
the Allocatee; (ii) impair the Allocatee's ability to carry out the authorized
use(s) of the NMTC Allocation to be provided hereunder; or (iii) impair the
Allocatee's right to enforce any material agreement to which it is a party.

4.3 Authorization; Consents. The execution, delivery and performance by the
Allocatee of the Allocation Agreement and the carrying out of the authorized
use(s) of the NMTC Allocation provided hereunder are within the Allocatee's
powers and have been duly authorized by all necessary corporate, partnership or
limited liability company action and no consent, approval, authorization or
order of, notice to and filing with, any third party including, without
limitation, any governmental entity which has not been previously obtained, is
required in connection with such execution, delivery and performance. The
Allocatee will make all such notices or filings that may be required after the
Allocation Date in accordance with the applicable time periods for such notices
or filings.

4.4 Execution and Delivery; Binding Agreement. This Allocation Agreement and all
documents connected herewith have been or will be, on or before the Allocation
Date, duly authorized, executed and delivered on behalf of the Allocatee and
constitute, on the Allocation Date, the legal, valid and binding obligations of
the Allocatee enforceable in accordance with their respective terms.

4.5 No Conflicts. The execution, delivery and performance by the Allocatee of
this Allocation Agreement and the carrying out of the authorized uses(s) of the
NMTC Allocation provided hereunder shall not result in any material violation of
and shall not materially conflict with, or result in a material breach of any of
the terms of, or constitute a material default under, any provision of Federal
or State law to which the Allocatee is subject, the Allocatee's incorporation,
charter, organization, formation or otherwise establishing documentation, bylaws


                                       11



or any agreement, judgment, writ, injunction, decree, order, rule or regulation
to which the Allocatee is a party or by which it is bound.

4.6 Litigation. The Allocatee has neither actual nor constructive knowledge of
any suit, action, proceeding or investigation pending or threatened that
questions the validity of this Allocation Agreement or any action taken or to be
taken pursuant hereto or contemplated hereby including, but not limited to, the
carrying out of the authorized use(s) of the NMTC Allocation to be provided
hereunder.

4.7 Compliance with Other Instruments. The Allocatee is not in material
violation of any provision of its incorporation, charter, organization,
formation or otherwise establishing documents, or in material violation of any
loan agreement or other material agreement to which it is a party. The Allocatee
is not in material violation of any instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to it, the violation of
which might have a material adverse effect on the business, affairs, operations,
or condition of the Allocatee.

4.8 Disclosure. Neither this Allocation Agreement, the Allocation Application
nor any attachment hereto, nor any certification or other document referenced or
incorporated herein or therein and furnished to the Fund by the Allocatee
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. The
Allocatee has disclosed, in writing, to the Fund all facts that might reasonably
be expected to result in a material adverse effect upon the Allocatee's ability
either to conduct its principal business or to carry out its proposed and herein
authorized uses of the NMTC Allocation to be provided hereunder. The Allocatee
has not knowingly and willfully made or used a document or writing containing
any false, fictitious or fraudulent statement or entry as part of its
correspondence or communication with the Fund. The Allocatee acknowledges, under
18 U.S.C. Section 1001, that if it knowingly and willfully makes or uses such
document or writing, it or its employee(s) or agents may be fined or imprisoned
for not more than five years, or both.

4.9 Taxes; Debts; Bankruptcy. The Allocatee is not delinquent on any debts owed
to Federal, State or local governments including, but not limited to, amounts
due under the Internal Revenue Code. The Allocatee has never filed for
bankruptcy and has neither actual nor constructive knowledge of any pending or
anticipated bankruptcy filings on its behalf.

4.10 Debarment, Suspension and Other Responsibility Matters. Pursuant to 31
C.F.R. 19.335, neither the Allocatee nor any of its principals (as defined by 31
C.F.R. 19.995): (a) are presently excluded or disqualified from covered
transactions by any Federal department or agency; (b) within the three-year
period preceding the Allocation Date, have been convicted of or had a civil
judgment rendered against them for any of the offenses listed in 31 C.F.R.
19.800(a); (c) are presently indicted for or otherwise criminally or civilly
charged by a governmental entity (Federal, State or local) with commission of
any of the offenses listed in 31 C.F.R. 19.800(a); or (d) within the three-year
period preceding the Allocation Date, have had one or more public transactions
(Federal, State, or local) terminated for cause or default.


                                       12



4.11 Status as a CDE. Since its certification as a CDE by the Fund, the
Allocatee has neither actual nor constructive knowledge of any changes that may
adversely affect its (or any of its Subsidiary Allocatees') status as a
certified CDE.

                                    ARTICLE V
                     CONDITIONS PRECEDENT TO NMTC ALLOCATION

     The obligation of the Fund to provide a NMTC Allocation to the Allocatee is
subject to the fulfillment, as determined by the Fund, in its sole discretion,
of the following conditions precedent, each of which shall be fulfilled prior to
or as of the Allocation Date.

5.1 Performance. The Allocatee shall have performed and complied with all
applicable agreements and conditions contained herein required to be performed
or complied with by it before or on the Allocation Date.

5.2 Opinion of Allocatee Counsel. Unless otherwise determined by mutual
agreement of the Fund and the Allocatee, the Fund shall have received from the
counsel for the Allocatee, an acceptable opinion or acceptable opinions, as
determined by the Fund, substantially in the form set forth in Attachment A
attached hereto.

5.3 Representations and Warranties. The representations and warranties set forth
in this Agreement, the Allocation Application and the Assurances and
Certifications contained in the Allocation Application are true and correct in
all material respects as of the Allocation Date.

5.4 Proceedings and Documents. All corporate and other proceedings in connection
with the transactions contemplated by this Allocation Agreement and all
documents and instruments incident to such transactions which are necessary for
the Allocatee's execution and delivery of the Allocation Agreement shall be
satisfactory in substance and form to the Fund, and the Fund shall have received
from the Allocatee all such counterpart originals or certified or other
documents as the Fund may reasonably request.

                                   ARTICLE VI
                    COVENANTS AND AGREEMENTS OF THE ALLOCATEE

     The Allocatee shall duly perform and observe each and all of the following
covenants and agreements:

6.1 Compliance with Government Requirements. In carrying out its
responsibilities pursuant to this Allocation Agreement, the Allocatee shall
comply with all applicable Federal, State and local laws, regulations,
ordinances, Office of Management and Budget (OMB) Circulars, and Executive
Orders.


                                       13



6.2  Fraud, Waste and Abuse.

     (a)  If the Allocatee becomes aware at any time of the existence of fraud,
          waste or abuse of the NMTC Allocation allocated pursuant to this
          Allocation Agreement, the Allocatee shall promptly report such
          incidence(s) to the Office of Inspector General of the U.S. Department
          of the Treasury.

     (b)  If a principal purpose of a transaction or a series of transactions is
          to achieve a result that is inconsistent with the purposes of the Act,
          the NMTC Program Income Tax Regulations, the Notice of Allocation
          Availability (70 FR 41075 and as amended 71 FR 12423), or this
          Allocation Agreement, the Fund, in its sole discretion, may treat the
          transaction or series of transactions as causing an event of default
          subject to the remedies available under Section 8.3 of this Agreement.

6.3 Right to Inspect and Audit. The Allocatee shall submit such financial and
activity reports, records, statements, documents, and other information as may
be requested by the Fund and the U.S. Department of the Treasury to ensure
compliance with this Allocation Agreement, the provisions of the Internal
Revenue Code and the NMTC Program Income Tax Regulations. The United States
Government including, but not limited to, the U.S. Department of the Treasury,
the Internal Revenue Service and the Comptroller General, and their duly
authorized representatives, shall have full and free access during reasonable
business hours to the Allocatee's offices and facilities and all books,
documents, records and financial statements relevant to the NMTC Allocation
provided hereunder. The Allocatee shall permit any of these authorities to copy
such documents as they deem appropriate. The purposes of such inspections and/or
audits will include, but not be limited to, ensuring that representations,
warranties, covenants, and/or certifications provided by the Allocatee are
accurate. Such inspections and/or audits may also be conducted to investigate a
taxpayer's claim for a New Markets Tax Credit, including a potential event of
recapture pursuant to IRC Section 45D(g) and 26 C.F.R. 1.45D-1(e)(2). The Fund
will, consistent with applicable law, including the Freedom of Information Act
(5 U.S.C. Section 552) and the Privacy Act (5 U.S.C. Section 552a), maintain the
confidentiality of all financial and other proprietary information disclosed to
the Fund pursuant to this section. Furthermore, the Fund will, consistent with
IRC Section 6103, maintain the confidentiality of, and adequately safeguard,
return information as provided to the Fund pursuant to this section.

6.4 Retention of Records. The Allocatee shall retain all financial records,
supporting documents, and any other records pertinent to the NMTC Allocation
(including the Allocatee's designation of Qualified Equity Investments and
making of QLICIs) as may be reasonably necessary to demonstrate, among other
things, the following:

     (a)  the manner in which the NMTC Allocation provided hereunder is used;

     (b)  compliance with the requirements of IRC Section 45D, the NMTC Program
          Income Tax Regulations and this Allocation Agreement; and

     (c)  information to evaluate the results of the NMTC Program.


                                       14



6.5 Reports. The Allocatee will be required to report on its compliance with the
requirements of the NMTC Program and this Allocation Agreement and to assist the
Fund in evaluating the results of the NMTC Program. Unless otherwise instructed
by the Fund, the Allocatee will submit its reports, except for audited financial
statements, to the Fund electronically using the Fund's Community Investment
Impact System (CIIS) and Allocation Tracking System. The reports are as follows:

     (a) Notice of Receipt of Qualified Equity Investment. Within 60 days after
     the date that a taxpayer makes an Equity Investment in the Allocatee and
     provided that the Allocatee designates such investment as a Qualified
     Equity Investment, the Allocatee shall notify the Fund using the Fund's
     electronic Allocation Tracking System. Such notice shall contain, but not
     be limited to, the following:

          (i)  The identification of each taxpayer (including, but not limited
               to, the name, taxpayer identification number, and address of the
               investment entity and any partners, members, or other legal
               entities comprising such investment entity) entitled to claim a
               NMTC as the result of a Qualified Equity Investment designated by
               the Allocatee; and

          (ii) The form, date and dollar amount of Qualified Equity Investments
               issued by the Allocatee.

     (b) Institution-Level Report: The institution-level report shall be
     submitted annually through CIIS and may include, but not be limited to,
     organizational, financial, portfolio and impact information, as well as:

          (i)  Certifications and business activity data related to the
               Allocatee's (and any of its Subsidiary Allocatees') maintenance
               of its status as a CDE;

          (ii) With respect to each Equity Investment that the Allocatee
               designates as a Qualified Equity Investment, a certification that
               the requirements of IRC Section 45D(b)(1)(B) and 26 C.F.R. 1.45D-
               1(c)(5) are met and that no recapture event within the meaning of
               IRC Section 45D(g) and 26 C.F.R. 1.45D-1(e)(2) has occurred; and

          (iii) Any other information that the Fund deems appropriate to ensure
               compliance with this Allocation Agreement and to evaluate the
               results of the NMTC Program.

Unless otherwise provided in guidance issued by the Fund, no later than 180 days
after the end of the Allocatee's fiscal year in which the Allocatee or its
Subsidiary Allocatee(s) issues its first Qualified Equity Investment and each
fiscal year of the Allocatee thereafter, the Allocatee shall deliver to the Fund
the Allocatee's institution-level report.


                                       15



     (c) Audited Financial Statements. No later than 180 days after the end of
     the Allocatee's first fiscal year ending after the Allocation Date and each
     fiscal year of the Allocatee thereafter, the Allocatee shall deliver to the
     Fund copies of the Allocatee's most recent statements of financial
     condition audited by an independent certified public accountant covering
     the Allocatee's fiscal year end.

     (d) Transaction-Level Report: The transaction-level report shall include:

          (i)  specific data elements on each of the Allocatee's QLICIs,
               including, but not limited to, the location, type and amount of
               the QLICIs, and information on the use of the proceeds of QLICIs
               by CDEs receiving Equity Investments or loans from the Allocatee
               or CDEs selling loans to the Allocatee; and

          (ii) any other information required to confirm the Allocatee's
               compliance with the terms of this Allocation Agreement, IRC
               Section 45D and the NMTC Program Income Tax Regulations.

Unless otherwise provided in guidance issued by the Fund, the Allocatee shall be
required to submit this report at least annually through CIIS, due no later than
180 days after the end of the Allocatee's fiscal year in which the Allocatee or
its Subsidiary Allocatee(s) makes its first QLICI and each fiscal year
thereafter. In addition, the Fund reserves the right to require additional
submissions of information related to this report, but not more frequently than
quarterly. If additional submissions are required, the Allocatee will be
notified of the specific due date for each additional submission of information
related to the transaction-level report at least 60 days prior to the respective
due date.

After the Institution-Level Reports and the Transaction-Level Reports are
submitted to the Fund, the Fund's CIIS Help Desk will review the report and send
any questions to the Allocatee. If the Allocatee fails to respond to such
questions within the Fund's required timeframe, the report will be considered
not submitted.

6.6 Equal Credit Opportunity Act. The Allocatee shall provide its products and
services in a manner that is consistent with the Equal Credit Opportunity Act
(15 U.S.C. Section 1691), to the extent that the Allocatee is subject to the
requirements of such Act.

6.7 Use of Allocation. The Allocatee shall use its NMTC Allocation provided
hereunder only as permitted hereby.

6.8 Maintain Existence as a CDE. The Allocatee shall do all things reasonably
necessary to preserve, renew and keep in full force and effect its existence as
a CDE.

6.9 Advise the Fund of Certain Material Events. The Allocatee shall advise the
Fund in writing in reasonable detail of any of the following events, within 20
calendar days of the occurrence of such events:


                                       16


     (a)  any proceeding instituted against the Allocatee or its Affiliates in,
          by or before any court, governmental or administrative body or agency,
          which proceeding or its outcome could reasonably be expected to have a
          material adverse effect upon the financial condition or business
          operations, of the Allocatee;

     (b)  any material adverse change in the condition, financial or otherwise,
          or operations of the Allocatee which would impair the Allocatee's
          ability to carry out the authorized uses of the NMTC Allocation to be
          provided hereunder;

     (c)  the occurrence of any Event of Default, as that term is defined in
          Section 8.1 hereof, or any event which upon notice or lapse of time,
          or both, would constitute an Event of Default;

     (d)  the occurrence of any event that may be a recapture event pursuant to
          IRC Section 45D(g) and 26 C.F.R. 1.45D-1(e)(2);

     (e)  the merger or acquisition of the Allocatee by or with another entity;

     (f)  the Allocatee's Controlling Entity (as identified in the Allocation
          Application) shall no longer have any ownership or management interest
          in the Allocatee; provided that the foregoing shall not be deemed to
          prohibit mergers, asset transfers, stock transfers, or similar
          transactions with respect to the Controlling Entity that pertain to
          the business operations of the Controlling Entity and are not
          primarily undertaken for the purpose of transferring Control of the
          Allocatee or the NMTC Allocation.;

     (g)  the replacement of any key management officials (e.g., the Executive
          Director, the Chief Financial Officer, the Board Chairperson or their
          equivalents) that had been named in the Allocation Application;

     (h)  the occurrence of any event described in 31 C.F.R. 19.350; or

     (i)  such other events that may be determined by the Fund, in its sole
          discretion, to be material events, and for which the Fund issues
          related guidance.

6.10 Disclosure to Potential Investors. The Allocatee will make all disclosures
required by Federal or State law, including applicable securities laws, to
taxpayers to whom the Allocatee issues Qualified Equity Investments and will
advise all such taxpayers to perform all necessary due diligence prior to making
an Equity Investment in the Allocatee. The Allocatee will also inform all such
taxpayers that the receipt of a NMTC Allocation from the Fund shall not be
deemed to be an assurance of any kind by the Fund regarding the taxpayer's
Equity Investment in the Allocatee.


                                       17



6.11 Common Enterprises. The Allocatee (or its Subsidiary Allocatees) shall not
become an Affiliate of or member of a common enterprise (as defined in the NOAA
and related Fund guidance) with another entity that received a NMTC Allocation
in the CY 2006 round of the NMTC Program (or its Subsidiary transferee), at any
time after the submission of the Allocation Application. This prohibition,
however, generally does not apply to entities that are commonly Controlled
solely because of common ownership by Qualified Equity Investment investors,
including investors that have received an NMTC Allocation.

                                   ARTICLE VII
                                 MONITORING FEE

7.1 Monitoring/Compliance Fee. The Allocatee agrees to pay to the Fund an annual
fee as may be assessed by the Fund, to cover the full cost (as defined in OMB
Circular A-25) to the Fund associated with monitoring the Allocatee's compliance
with the requirements of the NMTC Program. The Fund will provide the Allocatee
with due dates and instructions for payment of such fee at a later date.

                                  ARTICLE VIII
               EVENTS OF DEFAULT, EVENTS OF RECAPTURE AND REMEDIES

8.1 Events of Default. If any one or more of the following events occurs, the
Fund, in its sole discretion, may find the Allocatee to be in default

     (a)  any representation, warranty, certification, assurance or any other
          statement of fact set forth in the Allocation Application of the
          Allocatee including, but not limited to, the Assurances and
          Certifications contained in the Application, is found by the Fund to
          be inaccurate, false, or incomplete when made, in any material
          respect;

     (b)  any representation, warranty, certification, assurance or any other
          statement of fact set forth in this Allocation Agreement as of the
          Allocation Date or any representation or warranty set forth in any
          document, report, certificate, financial statement or instrument now
          or hereafter furnished in connection with this Allocation Agreement as
          of the Allocation Date or thereafter, is found by the Fund to be
          inaccurate, false, or incomplete when made, in any material respect;

     (c)  the failure of the Allocatee to observe, comply with or perform any
          term, covenant, agreement or other provision contained in IRC Section
          45D, the NMTC Program Income Tax Regulations, the Allocation Agreement
          or any instrument,


                                       18



          note or any other document delivered to the Fund in connection with or
          pursuant to this Allocation Agreement;

     (d)  the failure of the Allocatee to conduct its business in the usual and
          ordinary course or to maintain its existence and right to carry on its
          business and duly obtain all necessary renewals and extensions thereof
          and to maintain, preserve and renew all such rights, powers,
          privileges and franchises to the extent that such failure has a
          material adverse effect on the Allocatee, its financial condition or
          business operations and impairs the Allocatee's ability to carry out
          the authorized use(s) of the NMTC Allocation to be provided hereunder;
          provided, however, that no default will be deemed to occur in the
          event that the Allocatee ceases or omits to exercise any rights,
          powers, privileges, or franchises that in the judgment of its board of
          directors may no longer be exercised in the best interests of the
          Allocatee; or

     (e)  the occurrence of a material event (as defined in Section 6.9 of this
          Allocation Agreement and with the exception of Section 6.9(c)) to the
          extent that such event has a material adverse effect on the Allocatee,
          its financial condition or business operations and impairs the
          Allocatee's ability to carry out the authorized uses of the NMTC
          Allocation to be provided hereunder.

8.2 Events of Recapture. If any one of the following events occurs, a Qualified
Equity Investment issued by the Allocatee is subject to a recapture event as
further defined in IRC Section 45D(g) and 26 C.F.R. 1.45D-1(e):

     (a)  the Allocatee ceases to be a certified CDE;

     (b)  the proceeds of a Qualified Equity Investment issued by the Allocatee
          ceases to be used as required by IRC Section 45D(b)(1)(B); or

     (c)  a Qualified Equity Investment issued by the Allocatee is redeemed by
          the Allocatee before the end of the 7-year credit period (as defined
          in 26 C.F.R. 1.45D-1(c)(5)(i)).

The Internal Revenue Service will determine all such events of recapture.

8.3 Remedies. If the Fund finds the Allocatee to be in default under Section 8.1
of this Allocation Agreement, the Fund may, in its sole discretion, take any one
or more of the following actions, subject to Section 8.6 of this Agreement:

     (a)  revoke approval of any other applications submitted to and declare as
          ineligible any other applications pending before the Fund by the
          Allocatee or any of its Affiliates under any of the Fund's programs;


                                       19



     (b)  terminate or reallocate any unused portion of the NMTC Allocation
          authorized hereunder;

     (c)  bar the Allocatee or any of its Affiliates from applying for a NMTC
          Allocation from the Fund or to any of the Fund's programs;

     (d)  require the Allocatee to convene a meeting(s) of its board of
          directors or other governing body at which meeting(s) the Fund will be
          given the opportunity to address the attendees with respect to the
          Fund's evaluations and concerns regarding the performance of the
          Allocatee under this Allocation Agreement;

     (e)  notify taxpayers (as identified in Section 6.5 of this Allocation
          Agreement) of the Allocatee's default under this Allocation Agreement;
          and

     (f)  take any other action permitted by the terms of this Allocation
          Agreement or available at law or in equity (except for recapture
          events as set forth in Section 8.2 of this Allocation Agreement).

8.4 Referral to IRS. The Fund may provide reports to the Internal Revenue
Service on the activities of each Allocatee based on the Allocatee's reports to
the Fund. The Internal Revenue Service may use such reports to, among other
things, aid in its determination of whether: (i) a Qualified Equity Investment
issued by the Allocatee is subject to a recapture event as defined in IRC
Section 45D(g) and 26 C.F.R. 1.45D-1(e)(2); (ii) a QLICI made by an Allocatee
meets the requirements of IRC Section 45D and 26 C.F.R 1.45D-1; and (iii) an
Allocatee continues otherwise to meet the requirements of IRC Section 45D and 26
C.F.R. 1.45D-1. The Fund may share with the IRS any other information that it
obtains, in such manner and at such times, as it deems appropriate, consistent
with IRC Section 6103.

8.5 No Waiver. No course of dealing on the part of the Fund or any delay or
failure on the part of the Fund to exercise any right herein will operate as a
waiver of the right or otherwise prejudice the Fund's rights, powers and
remedies under this Allocation Agreement, the Notice of Allocation, the NOAA,
any guidance documents published by the Fund, the Act, the NMTC Program Income
Tax Regulations or any other applicable law or regulation.

8.6 Prior Notice to Allocatee of Sanctions. Prior to exercising or imposing any
remedy contained herein, the Fund will provide the Allocatee with written notice
of the incident(s) giving rise to the default and the proposed remedy (or
remedies). The Fund's written notice will give the Allocatee up to 90 calendar
days from the date of the notice to respond to and to cure the incident(s)
giving rise to the default. If the Allocatee fails to respond and correct the
incident(s) giving rise to the default within the time period provided in the
written notice, the Fund may, in its sole discretion, impose or exercise the
remedy (or remedies) set forth in its written notice. Nothing in this Allocation
Agreement, however, will provide the Allocatee with any right to any formal or
informal hearing or comparable proceeding not otherwise required by law. In the
event of a recapture event under IRC Section 45D(g) and 26 C.F.R. 1.45D-1(e)(2),
this section does not apply.


                                       20


8.7 Joint and Several Liability. The Allocatee and each of its Subsidiary
Allocatees are hereby jointly and severally liable for any event of default
under Section 8.1 of this Allocation Agreement whether the Allocatee or any of
its Subsidiary Allocatees incurs such default. If such an event of default
occurs, the Fund may, in its sole discretion, subject to Section 8.6 of this
Allocation Agreement, impose any of the remedies listed in Section 8.3 of this
Allocation Agreement jointly or severally upon the Allocatee and its Subsidiary
Allocatees, except that Section 8.3(b) of this Allocation Agreement shall not be
imposed with respect to any investment commitments related to a NMTC Allocation
made to a non-defaulting Allocatee or Subsidiary Allocatee, as determined by the
Fund. For purposes of this section, an investment commitment must be evidenced
by a written, signed document in which: (i) an investor commits to make an
investment in the Allocatee or Subsidiary Allocatee in a specified amount and on
specified terms; (ii) an investor has made an initial disbursement of investment
proceeds related to such investment commitment to the Allocatee or Subsidiary
Allocatee; and (iii) the investor commits to disburse the remaining investment
proceeds based on specified amounts and payment dates.

                                   ARTICLE IX
                                  MISCELLANEOUS

9.1 Notices. All notices, requests, demands, consents, waivers and other
communications given under any provision of this Allocation Agreement shall be
in writing and shall be delivered by electronic mail, CIIS or the Allocation
Tracking System, by hand, mailed by postage-prepaid first-class mail or
delivered by overnight courier service, to the addresses and individuals
indicated below, or to such different address or addresses as the addressee may
have specified in a notice duly given to the sender:

     if to the Fund:

        Community Development Financial Institutions Fund
        Department of the Treasury
        Attention: Grants Manager
        601 13th Street, NW, Suite 200 South
        Washington, DC 20005
        grantsmanagement@cdfi.treas.gov

     if to the Allocatee:

        Allocatee's physical or electronic mailing address as listed in the
        Fund's electronic database.
        Attention: Authorized Representative

All such notices shall be deemed as received on the date of actual receipt by
the Fund or the Allocatee.


                                       21



9.2 Entire Agreement. This Allocation Agreement, the Schedules, the material
provisions of the Allocation Application and the attachments, exhibits,
appendices and supplements to the Application, and the Notice of Allocation
between the Allocatee and the Fund with respect to the NMTC Allocation contain
the entire agreement of the parties with respect to the subject matter hereof
and supersede all prior agreements or understandings, written or oral, in
respect thereof, and no change, modification or waiver of any provision hereof
shall be valid unless in writing and signed by the party to be bound. The
Allocation Application, including any attachments, exhibits, appendices and
supplements thereto, any Schedules, attachments, exhibits, appendices and
supplements to this Allocation Agreement, and said Notice of Allocation are
incorporated in and made a part of this Allocation Agreement.

9.3 Assignment. The Allocatee may not assign, pledge or otherwise transfer any
rights, benefits or responsibilities of the Allocatee under this Allocation
Agreement except as set forth in Section 3.2(c) of this Allocation Agreement,
without the prior written consent of the Fund.

9.4 Successors. The rights, benefits and responsibilities of each of the parties
hereto shall inure to their respective successors, subject to this Section 9.4.
If the Allocatee merges with or is acquired by another entity, the Fund reserves
the right to examine the new entity, which acquired or merged with the
Allocatee, to determine its acceptability as an Allocatee. If the Fund
determines that the new entity is not eligible or acceptable as an Allocatee, or
if the new entity does not agree to abide by all the provisions of this
Allocation Agreement and shall continue operations and performance as if there
were no interruption in the parties to this Agreement, the Fund may terminate
the continued provision of the NMTC Allocation under this Allocation Agreement
and take any or all remedies it deems appropriate in accordance with Sections
8.3 and 8.6 herein.

9.5 Severability. If any provision of this Allocation Agreement shall for any
reason be held to be illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall not affect any other provision of this
Allocation Agreement, and this Allocation Agreement shall be construed as if
such illegal, invalid or unenforceable provision had never been contained
herein.

9.6 No Waiver. No delay or failure on the part of either party in exercising any
rights hereunder, and no partial or single exercise thereof, shall constitute a
waiver of such rights or of any other rights hereunder.

9.7 Applicable Law. This Allocation Agreement shall be governed by and construed
in accordance with Federal law to the extent such Federal law is applicable, and
to the extent Federal law is not applicable, this Allocation Agreement shall be
governed by and construed in accordance with the law of the State of formation
of the Allocatee or its Subsidiary Allocatees, as the case may be.

9.8 Disclaimer of Relationships.

     (a)  The Allocatee shall not be deemed to be an agency, department or
          instrumentality of the United States merely by virtue of it being an
          Allocatee.


                                       22



     (b)  Nothing in this Allocation Agreement, nor any act of the Fund or the
          Allocatee, shall be construed by either of them, or by a third party,
          to create any relationship of third-party beneficiary, principal and
          agent, limited or general partner or joint venture, or of any
          association or relationship whatsoever involving the Fund and the
          Allocatee.

     (c)  Notwithstanding any other provision of law, the Fund shall not be
          deemed to control the Allocatee by reason of any NMTC Allocation
          provided hereunder for the purpose of any other applicable law.

     (d)  The Allocatee's receipt of a NMTC Allocation from the Fund shall not
          be deemed to be an assurance of any kind by the Fund regarding a
          taxpayer's Equity Investment in the Allocatee.

9.9 Counterparts. This Allocation Agreement may be executed in counterparts,
each of which shall constitute an original but all of which together shall
constitute one and the same instrument.

9.10 Headings. The headings contained in this Allocation Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Allocation Agreement.

9.11 Amendments. The terms of this Allocation Agreement may be amended,
modified, or supplemented by the mutual written consent of the parties hereto.
All amendment requests must be directed to the Grants Manager at
grantsmanagement@cdfi.treas.gov.

Notwithstanding the above, the Fund may, upon reasonable notice to the Awardee,
unilaterally amend the Allocation Agreement for the sole purpose of making
ministerial or administrative changes or correcting scrivener's errors.

9.12 Survival of Representations and Warranties. All representations,
warranties, covenants, and agreements made by the Allocatee in this Allocation
Agreement or the Application, including, without limitation, all Assurances and
Certifications contained in the Application, or in any document, report,
certificate, financial statement, note or instrument now or hereafter furnished
in connection with this Allocation Agreement shall survive the execution and
delivery of this Allocation Agreement and the provision of any NMTC Allocation
pursuant hereto, except as otherwise agreed to by the Fund.

9.13 Termination. Unless otherwise mutually agreed upon in writing by the
parties hereto, this Allocation Agreement shall terminate at such time that:

     (a)  the Fund determines that the Allocatee has submitted to the Fund all
          reports required by this Allocation Agreement covering the 7-year
          credit period (as defined in 26 C.F.R. 1.45D-1(c)(5)(i)) after the
          Allocatee issues its last Qualified Equity Investment related to its
          NMTC Allocation; and


                                       23



     (b)  the Fund determines that the NMTC Allocation has been used as
          permitted hereby or two years after the 7-year credit period (as
          defined in 26 C.F.R. 1.45D- 1(c)(5)(i)) after the Allocatee issues its
          last Qualified Equity Investment related to its NMTC Allocation,
          whichever date is earlier.

This Section 9.13 shall not, in any manner, waive or supersede any rights,
powers, or remedies available to the Department of the Treasury or the Internal
Revenue Service pursuant to the Act, the Internal Revenue Code or any other
applicable law or regulation.

9.14 Disclosure of Allocatee Reports by Fund. The Fund will, consistent with
applicable law (including IRC Section 6103), make reports described in Article
VI hereof available for public inspection after deleting any materials necessary
to protect privacy or proprietary interests. The Fund will also make reports
described in Article VI hereof available to the Internal Revenue Service for the
purpose of determining the Allocatee's and its investors' compliance with the
requirements of IRC Section 45D and the NMTC Program Income Tax Regulations.

9.15 Compliance with Non-Discrimination Statutes. The Allocatee shall comply, to
the extent applicable, with all Federal statutes relating to non-discrimination,
including, but not limited to: Title VI of the Civil Rights Act of 1964; Title
IX of the Education Amendments of 1972; Section 504 of the Rehabilitation Act of
1973; the Age Discrimination Act of 1975; the Drug Abuse Office and Treatment
Act of 1972; the Comprehensive Alcohol Abuse and Alcoholism Prevention,
Treatment and Rehabilitation Act of 1970; Sections 523 and 527 of the Public
Health Service Act of 1912; and Title VIII of the Civil Rights Act of 1968.


                                       24


                                                                      SCHEDULE 3
                  ALLOCATEE: ROCKLAND TRUST COMMUNITY DEVELOPMENT CORPORATION II
                                                        CONTROL NO.: 06NMA002322

                           FORM OF OPINION OF COUNSEL

            [THIS FORM MUST BE SUBMITTED ON THE COUNSEL'S LETTERHEAD]

                                     [Date]

TO: Community Development Financial Institutions Fund
    601 13th Street, N.W., Suite 200 South
    Washington, D.C. 20005
    Attention: Grants Manager

RE: New Markets Tax Credit Program Allocation
    [Name of Allocatee] [Control No. 05NMA00]

    [If applicable][Name of Each Subsidiary Allocatee and the respective CDE
    No.]

Dear Ladies and Gentlemen:

     The undersigned counsel represents the above-referenced [Allocatee] and
[Subsidiary Allocatees] as counsel in connection with an allocation of New
Markets Tax Credits (NMTC) to [Allocatee] from the Community Development
Financial Institutions (CDFI) Fund in the third round of the NMTC Program. We
have reviewed the General Guidance (66 FR 21846); the CDE Certification Guidance
(66 FR 65806); the Notice of Allocation Availability for the NMTC Program (70 FR
41075 and as amended 71 FR 12423); Section 45D of the Internal Revenue Code and
the regulations issued pursuant thereto; and made such other investigations of
law, as we have deemed appropriate. We have also reviewed the Allocation
Agreement and such other documents and records as we have deemed necessary to
render this opinion. Capitalized terms contained herein shall have the same
meaning assigned to them in the Allocation Agreement.

     Based upon the foregoing, the undersigned is of the opinion that:

          a.   The Allocatee is a domestic [corporation] [partnership] for
               Federal tax purposes. [The Subsidiary Allocatee is a domestic
               corporation/ partnership for Federal tax purposes]. The
               Allocatee is a [insert corporate form] and is validly existing
               and in good standing (if applicable) under the laws of the State
               of ___________ and it is



               legally authorized to transact business in each jurisdiction in
               which it is authorized to use its NMTC Allocation to the extent
               such authorization is required to undertake the activities
               related to its NMTC Allocation. The Allocatee is currently
               transacting business in the State(s) of ___________. [The
               Subsidiary Allocatee is a [insert corporate form] and is validly
               existing and in good standing (if applicable) under the laws of
               the State of ___________ and it is legally authorized to transact
               business in each jurisdiction in which it is authorized to use
               the NMTC Allocation to the extent such authorization is required
               to undertake the activities related to the NMTC Allocation. The
               Subsidiary Allocatee is currently transacting business in the
               State(s) of ________________.]

          b.   The execution, delivery and performance by the Allocatee [and the
               Subsidiary Allocatees] of the Allocation Agreement are within the
               Allocatee's [and Subsidiary Allocatees'] corporate [partnership]
               powers and have been duly authorized by all requisite corporate
               [partnership] action and no additional authorizations are
               required which have not been previously obtained.

          c.   The execution, delivery and performance by the Allocatee [and the
               Subsidiary Allocatees] of the Allocation Agreement shall not
               result in any violation of and shall not conflict with, or
               result in a breach of any of the terms of, or constitute a
               default under any provision of the Allocatee's [and the
               Subsidiary Allocatees'] incorporation, charter, organization,
               bylaws or other establishing documents or to our knowledge any
               provision of Federal or State law to which the Allocatee [or the
               Subsidiary Allocatees] is subject, or any agreement, judgment,
               writ, injunction, decree, order, rule or regulation to which the
               Allocatee [or the Subsidiary Allocatees] is a party or by which
               it is bound. The Subsidiary Allocatee(s) listed in Section 3.2(c)
               of the Allocation Agreement are Subsidiaries of the Allocatee and
               the Allocatee has a controlling influence over the investment
               decisions of each Subsidiary Allocatee.

          d.   The Allocation Agreement and all documents related thereto to
               which the Allocatee or the Subsidiary Allocatee is a party and
               executed and delivered by the Allocatee or Subsidiary Allocatee
               as of the date hereof constitute the legal, valid and binding
               obligations of the Allocatee [and the Subsidiary Allocatees]
               enforceable in accordance with their respective terms.

          e.   To our knowledge, there is no suit, action, proceeding, or
               investigation, pending or threatened against the Allocatee [or
               the Subsidiary Allocatees] that questions the validity of the
               Allocation Agreement or any actions taken or to be taken pursuant
               thereto.


                                        2



This opinion is based upon the laws of the State(s) of _______ [this list must
include the incorporation laws of the Allocatee and Subsidiary Allocatee(s)
State(s) of formation and the laws of all States listed in opinion a. as States
where the Allocatee and/or Subsidiary Allocatee(s) are currently transacting
business] and the Federal laws of the United States. This opinion is rendered
solely in connection with the CDFI Fund's provision of the NMTC Allocation to
the Allocatee [and the Subsidiary Allocatees]. Accordingly, it may be relied
upon only by the CDFI Fund and may not be relied upon by any other party for
any other purpose.

                                        ----------------------------------------
                                        Name of Counsel


                                        By:
                                            ------------------------------------


                                        3

EX-10.19

                                                                   Exhibit 10.19

                                                        "CONFIDENTIAL TREATMENT"

PLEASE NOTE: The only portions of this Plan for which the Applicant seeks
confidential treatment are the financial performance criteria set forth in
Schedule 3, Schedule 3A and Schedule 3B, which have been omitted from the public
filing and are indicated as follows: "(****)"

                             INDEPENDENT BANK CORP.
                           AND ROCKLAND TRUST COMPANY
                  EXECUTIVE OFFICER PERFORMANCE INCENTIVE PLAN

                   Plan Approval, Plan Year, and Defined Terms

     This Independent Bank Corp. And Rockland Trust Company Executive Officer
Performance Incentive Plan (the "Plan") has been approved by the Board on
February 15, 2007, based upon the recommendation of the Compensation Committee,
for use in the 2007 calendar year.

     Capitalized terms used in this Plan are defined as set forth below in
Section 5.

SECTION 1: PURPOSE

     This Plan has been created to provide salaried Executive Officers of the
Holding Company and the Bank who are not entitled to sales commissions with a
cash incentive program designed to motivate them to perform to their full
potential and thereby assist the Holding Company and the Bank in achieving
financial success. The financial success of the Holding Company and the Bank
shall be determined by comparing the financial results of the Holding Company
with specific financial performance goals approved by the Board, based upon the
recommendation of the Compensation Committee.

     A diagram depicting the process and computation used to determine a
Participant's Award, which is more fully described below, is attached hereto as
Schedule 1.

SECTION 2: AWARDS

     Awards to Participants will be determined, and paid, as follows:

a.   PARTICIPANTS. The persons eligible to receive Awards will consist of the
     Executive Officers. ANY EXECUTIVE OFFICERS WHO ARE PAID SALES COMMISSIONS
     ARE NOT ELIGIBLE TO PARTICIPATE IN THIS PLAN. Executive Officers will be
     eligible to participate in this Plan upon their first date of employment.
     Executive Officers with less than one year of service will receive a
     prorated award based on length of service. Newly elected Executive Officers
     will participate in this Plan upon election to Executive Officer status.

b.   AWARD DETERMINATION. The Award for the CEO will be derived from the product
     of the CEO's Target Award multiplied by the Bank Performance Factor. The
     Award for all


                                                                    Page 1 of 13



                                                        "CONFIDENTIAL TREATMENT"

     Participants other than the CEO will be derived from the product of the
     Participant's Target Award multiplied by the Bank Performance Adjustment
     Factor and multiplied by the Individual Performance Adjustment Factor. The
     Award payable to any Participant, therefore, may be less than or more than
     the Participant's Target Award, depending upon whether, or the extent to
     which, Bank Performance Goals and -- if applicable -- individual
     Performance Goals and Objectives for the Plan Year have been achieved.

c.   TARGET AWARDS. Target Awards will be established by the Board for each
     Participant. The tiers of percentages used to determine Target Awards for
     Executive Officers for the Plan Year is attached hereto as Schedule 2.

d.   BANK PERFORMANCE GOALS. Bank Performance Goals will be established by the
     Board as soon as practical. The Bank Performance Goals for the Plan Year
     are attached hereto as Schedule 3. In general, Bank Performance Goals will
     measure the Holding Company's financial performance and also, when
     appropriate, the achievement of specified strategic goals and/or
     operational objectives.

e.   BANK PERFORMANCE ADJUSTMENT FACTOR. The Bank Performance Adjustment Factor
     may be adjusted upward or downward within the parameters set forth on
     Schedule 3 based upon the performance of the Holding Company as to a given
     performance criteria set forth in the Bank Performance Goals. The range of
     the Bank Performance Adjustment Factor for the CEO with respect to the
     Earnings Per Share Measure is set forth on Schedule 3A. The range of the
     Bank Performance Adjustment Factor for all Participants other than the CEO
     with respect to the Earnings Per Share Measure is set forth on Schedule 3B.
     The range of the Bank Performance Adjustment Factor set forth on Schedule
     3A and Schedule 3B, however, is subject to a 75% reduction if the threshold
     set forth on Schedule 3 for either the Return On Average Equity Measure or
     the Return On Average Assets Measure is not met.

f.   INDIVIDUAL PERFORMANCE ADJUSTMENT FACTOR. The Individual Performance
     Adjustment Factor will not be applicable to the CEO. For all Participants
     other than the CEO, the Individual Performance Adjustment Factor may be
     adjusted upward or downward within the parameters set forth on Schedule 4
     based upon an evaluation of their achievement of individual Performance
     Goals and Objectives for the Plan Year.

g.   PAYMENT OF AWARDS. Awards will be paid, in cash, as soon as practicable
     after the close of the Plan Year. No Award will be payable to any
     Participant who is not an Employee on the last day of the Plan Year except
     that if, during the last eight months of the year, the Participant takes
     normal retirement (as defined in the Bank's principal retirement program),
     dies, or is involuntarily terminated other than for Cause, the Participant
     may be entitled to a prorated Award as and to the extent determined by the
     Board. If a Participant is on disability for more than four months of the
     Plan Year, the Participant will be entitled to a prorated Award. If
     disability lasts four months or less, there will be no reduction in the
     amount of the Award. Participants who resign voluntarily after the end of
     the year, but before Award payments are made, will be eligible for an Award
     as and to the extent determined by the Board. Participants who leave after
     the end of the Plan Year with an overall rating of "1" or "2" on their
     Employee Performance Appraisal for the Plan Year will not be eligible for
     an


                                                                    Page 2 of 13



                                                        "CONFIDENTIAL TREATMENT"

     Award. In the event of a Change of Control, the funds accrued by the Bank
     to the date of the Change of Control will, subject to the approval of the
     Board, be awarded to the Participants according to the terms of this Plan.

SECTION 3: ADMINISTRATION

This Plan will be administered by the Board, based upon the recommendations of
the Compensation Committee. All determinations regarding the achievement of any
Bank Performance Goals, the achievement of a Participant's individual
Performance Goals and Objectives, and the amount of any individual Award will be
made by the Board, in its sole and absolute discretion, based upon the
recommendations of the Compensation Committee. Notwithstanding any other
provision of this Plan to the contrary, the Board reserves the right, in its
sole and absolute discretion, to: make adjustments to the Bank Performance
Adjustment Factor within the parameters set forth on Schedule 3 based upon
either one-time, non-recurring, or extraordinary events or any other reason that
the Board deems appropriate; increase the Award for the CEO up to a maximum of
1.25 times the amount that would be called for by the product of the CEO's
Target Award multiplied by the Bank Performance Adjustment Factor; and, to
reduce, including a reduction to zero, any Award to a Participant otherwise
payable under this Plan.

a.   AUTHORITY. The Board will have authority (i) to exercise all of the powers
     granted under this Plan, (ii) to construe, interpret and implement this
     Plan and any related document, (iii) to prescribe, amend and rescind rules
     relating to this Plan, (iv) to make all determinations necessary or
     advisable in administering this Plan, and (v) to correct any defect, supply
     any omission and reconcile any inconsistency in this Plan. The Board shall
     also have such other and further specified duties, powers, authority, and
     discretion as are elsewhere expressly set forth in this Plan or as may be
     conferred upon the Board by necessary implication.

b.   DETERMINATIONS FINAL. The actions and determinations of the Board on all
     matters relating to the Plan and any Awards will be final and conclusive,
     except to the extent otherwise provided by law.

c.   LIABILITY. The Board will not be liable for any action taken or
     determination made in good faith with respect to this Plan or any Award
     hereunder, and the Holding Company and the Bank will indemnify and hold the
     Board harmless with respect to any actions taken or decisions made in good
     faith under this Plan.

d.   AWARDS. The Board will have authority to determine, among other things, the
     Executive Officers to whom, and the time or times at which, Awards will be
     made and the requisite conditions thereof.

SECTION 4: MISCELLANEOUS

a.   NONASSIGNABILITY. No Award will be assignable or transferable (including
     pursuant to a pledge or security interest) other than by will or by laws of
     descent and distribution.


                                                                    Page 3 of 13



                                                        "CONFIDENTIAL TREATMENT"

b.   WITHHOLDING TAXES. Whenever payments under this Plan are to be made, the
     Bank may withhold therefrom an amount sufficient to satisfy any applicable
     governmental withholding tax requirements related thereto.

c.   AMENDMENT OR TERMINATION OF THIS PLAN. The Board may from time to time
     suspend or discontinue this Plan or revise, amend, or terminate this Plan.

d.   NON-UNIFORM DETERMINATIONS. The Board's determinations under this Plan need
     not be uniform and may be made selectively among persons who receive, or
     are eligible to receive, Awards under this Plan, whether or not such
     persons are similarly situated. Without limiting the generality of the
     foregoing, the Board will be entitled, among other things, to make
     non-uniform and selective determinations and to establish non-uniform and
     selective Target Awards. Any non-uniform determinations known at the time
     this Plan was approved are set forth on Schedule 5.

e.   OTHER PAYMENTS OR AWARDS. Nothing contained in this Plan will be deemed in
     any way to limit or restrict the Holding Company, the Bank, or the Board,
     from making any award or payment to any person under any other plan,
     arrangement or understanding, whether now existing or hereafter in effect.

f.   PAYMENTS TO OTHER PERSONS. If payments are legally required to be made to
     any person other than the person to whom any amount is available under this
     Plan, payments will be made accordingly. Any such payment will be a
     complete discharge of the liability of the Holding Company, the Bank,
     and/or the Board.

g.   UNFUNDED PLAN. This is an unfunded Plan. No provision of this Plan will
     require the Holding Company or the Bank, for the purpose of satisfying any
     obligations under this Plan, to purchase assets or place any assets in a
     trust or other entity to which contributions are made or otherwise to
     segregate any assets, nor will the Holding Company or the Bank maintain
     separate bank accounts, books, records or other evidence of the existence
     of a segregated or separately maintained or administered fund for such
     purposes. Participants will have no rights under this Plan other than as
     unsecured general creditors of the Holding Company and the Bank, except
     that insofar as they may have become entitled to payment of additional
     compensation by performance of services, they will have the same rights as
     other employees under generally applicable law.

h.   LIMITS OF LIABILITY. Neither the Holding Company, the Bank, the Board, nor
     any other person participating in any determination of any question under
     this Plan, or in the interpretation, administration or application of this
     Plan, will have any liability to any party for any action taken or not
     taken in good faith under this Plan.

i.   RIGHTS OF EMPLOYEES. Nothing contained in this Plan will confer upon any
     Employee or Participant any right to continue in the employ or other
     service of the Holding Company or the Bank or constitute any contract or
     limit in any way the right of the Holding Company or the Bank to change
     such person's compensation or other benefits or to terminate the employment
     or other service of such person with or without Cause.


                                                                    Page 4 of 13



                                                        "CONFIDENTIAL TREATMENT"

j.   SECTION HEADINGS. The section headings contained herein are for the
     purposes of convenience only, and in the event of any conflict, the text of
     this Plan, rather than the section headings, will control.

k.   INVALIDITY. If any term or provision contained herein will to any extent be
     invalid or unenforceable, such term or provision will be reformed so that
     it is valid, and such invalidity or unenforceability will not affect any
     other provision or part hereof.

l.   APPLICABLE LAW. The Plan will be governed by the laws of the Commonwealth
     of Massachusetts without regard to the conflict of law principles thereof.

SECTION 5: DEFINITIONS

The following terms, as used herein, will have the meaning specified:

a.   "AWARD" means a cash incentive payment made to a Participant pursuant to
     this Plan.

b.   "BANK" means Rockland Trust Company.

c.   "BANK PERFORMANCE GOALS" means the criteria set forth on Schedule 3 that
     have been selected to measure the Holding Company's financial performance
     and also, when appropriate, the achievement of specified strategic goals
     and/or operational objectives.

d.   "BANK PERFORMANCE ADJUSTMENT FACTOR" means a factor determined by the level
     of performance against the criteria set forth in the Bank Performance
     Goals.

e.   "BOARD" means the Board of Directors of the Holding Company, as it may be
     comprised from time to time.

f.   "CAUSE" means (i) a felony conviction of a Participant; (ii) the commission
     by a participant of an act of fraud or embezzlement against the Bank or the
     Holding Company; (iii) willful misconduct or gross negligence materially
     detrimental to the Holding Company or the Bank; (iv) the Participant's
     continued failure to implement reasonable requests or directions after
     thirty (30) days written notice to the Participant; (v) the Participant's
     wrongful dissemination or use of confidential or proprietary information;
     (vi) the intentional and/or habitual neglect by the Participant of his or
     her duties to the Holding Company or the Bank; or (vii) a breach of the
     Code of Ethics for the Holding Company and the Bank; (viii) any other
     reasons consistent with the Holding Company's and/or the Bank's policies
     and procedures regarding dismissals as they are adopted and implemented
     from time to time.

g.   "CHANGE OF CONTROL" means that, prior to any payout under this Plan (a) any
     "person" (as such term is defined in Section 13 (d) of the Securities
     Exchange Act of 1934, as amended) is or becomes the beneficial owner,
     directly or indirectly, of either (i) a majority of the outstanding common
     stock of the Holding Company or the Bank, or (ii) securities of either the
     Holding Company or the Bank representing a majority of the combined voting
     power of


                                                                    Page 5 of 13



                                                        "CONFIDENTIAL TREATMENT"

     the then outstanding voting securities of either the Holding Company or the
     Bank, respectively, or (b) during any period of two consecutive years
     following the date of this Plan, individuals who at the beginning of any
     such two year period constitute the Board of Directors of the Holding
     Company cease, at any time after the beginning of such period, for any
     reason to constitute a majority of the Board, unless the election of each
     new director was nominated or approved by at least two thirds of the
     directors of the Board then still in office who were either directors at
     the beginning of such two year period or whose election or whose nomination
     for election was previously so approved.

h.   "CEO" shall mean the Chief Executive Officer of the Holding Company and of
     the Bank.

i.   "COMPENSATION COMMITTEE" means the Joint Compensation Committee of the
     Boards of Directors of the Holding Company and the Bank.

j.   "EXECUTIVE OFFICER" means the CEO and any other person who has been
     identified as an Executive Officer of the Holding Company and/or the Bank
     in filings with the Securities Exchange Commission.

k.   "HOLDING COMPANY" means Independent Bank Corp.

l.   "INDIVIDUAL PERFORMANCE ADJUSTMENT FACTOR" means a factor (or factors) that
     will, when multiplied by a Participant's Target Award and the Bank
     Performance Adjustment Factor, determine the amount of a Participant's
     Award.

m.   "PARTICIPANT" means an Executive Officer selected to participate in this
     Plan whose cash compensation (other than salary) is not superseded by an
     individual employment agreement or other incentive plan. If any employee is
     governed by an individual employment agreement, such employee may be a
     Participant in the Plan to the extent the terms of such agreement does not
     supersede this Plan. EMPLOYEES WHO ARE PAID SALES COMMISSIONS ARE NOT
     ELIGIBLE TO PARTICIPATE IN THIS PLAN.

n.   "PLAN" means this Independent Bank Corp. And Rockland Trust Company
     Executive Officer Performance Incentive Plan.

o.   "PLAN YEAR" shall mean the calendar year for which this Plan has been
     approved.

p.   "TARGET AWARD" means the Participant's base salary on November 1st of the
     Plan Year, multiplied by the target percentage established for that
     Participant.


                                                                    Page 6 of 13



                                                        "CONFIDENTIAL TREATMENT"

                                                                      SCHEDULE 1

                        2007 Incentive Compensation Plan

                          {2007 Incentive flow chart}

   THE INDIVIDUAL PERFORMANCE ADJUSTMENT FACTOR IS NOT APPLICABLE TO THE CEO.


                                                                    Page 7 of 13



                                                        "CONFIDENTIAL TREATMENT"

                                                                      SCHEDULE 2

                       PERCENTAGE TIERS USED TO DETERMINE
                      TARGET AWARDS FOR EXECUTIVE OFFICERS

                                      
President/CEO                            45%
EVP - Commercial Loan                    30%
EVP - Retail & Marketing                 30%
Treasurer/Chief Financial Officer        30%
Director of Human Resources              20%
General Counsel                          20%
Chief Technology & Operations Officer.   20%




                                                                    Page 8 of 13



                                                        "CONFIDENTIAL TREATMENT"

                                                                      SCHEDULE 3

                           BANK PERFORMANCE GOALS AND

                       BANK PERFORMANCE ADJUSTMENT FACTORS



                                                BANK PERFORMANCE
                                            GOALS & BANK PERFORMANCE
                                               ADJUSTMENT FACTORS
                                          ----------------------------
MEASURE                                   THRESHOLD   TARGET   MAXIMUM
- -------                                   ---------   ------   -------
                                                   
HOLDING COMPANY       Performance Level     (****)    (****)    (****)
OPERATING EARNINGS
PER SHARE BEFORE     Adjustment:All but       50%      100%      125%
INCENTIVE PAYMENTS                  CEO

                        Adjustment: CEO       25%      100%      200%

HOLDING COMPANY       Performance Level     (****)
OPERATING RETURN
ON AVERAGE EQUITY*           Adjustment       75%      Not Applicable

HOLDING COMPANY       Performance Level     (****)
OPERATING RETURN
ON AVERAGE ASSETS*           Adjustment       75%


CONSISTENT WITH THIS PLAN, THE BOARD RESERVES THE RIGHT TO ADJUST ANY AWARDS BY
   CONSIDERING FACTORS INCLUDING - BUT NOT LIMITED TO - COMPLIANCE AND CREDIT
                                     QUALITY

- ----------
*    The greatest adjustment is a reduction to 75% of the Bank Performance if
     one or both of the Thresholds is missed.


                                                                    Page 9 of 13



                                                        "CONFIDENTIAL TREATMENT"

ROA AND ROE DEFINITION FOR SCHEDULE 3

For purposes of computing Holding Company Operating Return on Average Assets
("ROA") and Holding Company Operating Return on Average Equity ("ROE") for
purposes of this Plan, earnings are equal to net income as reflected on the
Company's audited consolidated statement of income adjusted, upwards or
downwards, for the after-tax effect of material non-recurring items.

EPS DEFINITION FOR SCHEDULES 3A AND 3B

For purposes of computing Operating Earnings Per Share Before Incentive Payment
("EPS") for purposes of this Plan, earnings are equal to net income as reflected
on the Company's audited consolidated statement of income excluding the
after-tax effect of the incentive expense for this Plan and adjusted, upwards or
downwards, for the after-tax effect of material non-recurring items.

                                                                     SCHEDULE 3A

                    2007 BANK PERFORMANCE ADJUSTMENT FACTORS
                  FOR CEO AT SPECIFIED LEVELS OF EPS ATTAINMENT



Operating
Earnings Per
Share Before                   Bank
Incentive                  Performance
Payment                       Payout
- ------------               -----------
                     
   (****)      THRESHOLD       25.0%
   (****)                      30.0%
   (****)                      35.0%
   (****)                      40.0%
   (****)                      45.0%
   (****)                      50.0%
   (****)                      55.0%
   (****)                      60.0%
   (****)                      65.0%
   (****)                      82.5%
   (****)      TARGET         100.0%
   (****)                     120.0%
   (****)                     140.0%
   (****)                     160.0%
   (****)                     180.0%
   (****)      MAXIMUM        200.0%



                                                                   Page 10 of 13



                                                        "CONFIDENTIAL TREATMENT"

                                                                     SCHEDULE 3B

                    2007 BANK PERFORMANCE ADJUSTMENT FACTORS
                         FOR PARTICIPANTS OTHER THAN CEO
                      AT SPECIFIED LEVELS OF EPS ATTAINMENT



Operating
Earnings Per
Share Before                   Bank
Incentive                  Performance
Payment                       Payout
- ------------               -----------
                     
   (****)      THRESHOLD       50.0%
   (****)                      52.0%
   (****)                      54.0%
   (****)                      56.0%
   (****)                      58.0%
   (****)                      60.0%
   (****)                      62.0%
   (****)                      64.0%
   (****)                      66.0%
   (****)                      83.0%
   (****)      TARGET         100.0%
   (****)                     105.0%
   (****)                     110.0%
   (****)                     115.0%
   (****)                     120.0%
   (****)      MAXIMUM        125.0%



                                                                   Page 11 of 13



                                                        "CONFIDENTIAL TREATMENT"

                                                                      SCHEDULE 4

                    INDIVIDUAL PERFORMANCE ADJUSTMENT FACTORS



Individual Goals and Objectives   Individual Performance
         for Plan Year               Adjustment Factor
- -------------------------------   ----------------------
                               
       Does Not Meet Most                   0.0

           Meets Most                    0.6 - 0.8

     Fully Meets All or all
       the most important                0.8 - 1.05

Exceeds Most or most meaningful         1.05 - 1.30

    Exceeds All or performs
       beyond objectives                1.30 - 1.70


An Executive Officer's achievement of individual performance Goals and
Objectives will be measured at his/her broadest level of individual
responsibility, based upon the "Goals for Next Year" section of his/her
performance appraisal for the Plan Year. The evaluation as to achievement of
individual performance Goals and Objectives will be based on the Board's
judgment of the Executive Officer's performance on results goals only, not
overall performance rating. The Board may adjust an Executive Officer's entire
Award downward if non-goals aspects of performance (e.g., values) assessed with
the Bank's Employee Performance Appraisal are considered less than acceptable.
Awards, however, may not be increased for performance at or better than
acceptable levels on non-goals aspects of performance.


                                                                   Page 12 of 13



                                                                      SCHEDULE 5

                       NON-UNIFORM DETERMINATIONS FOR 2007

            No non-uniform determinations have yet been made for 2007


                                                                   Page 13 of 13

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Independent Bank Corp.:

We consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 033-60293, 333-04259, 333-27169, 333-31107, 333-82998, 333-126986 and 333-133334) and Form S-4 (No. 333-114294) of Independent Bank Corp. of our reports dated February 26, 2007, with respect to the consolidated balance sheets of Independent Bank Corp. and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders’ equity, comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2006, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and effectiveness of internal control over financial reporting as of December 31, 2006, which reports appear in the December 31, 2006, annual report on Form 10-K of Independent Bank Corp.

/s/ KPMG LLP
Boston, Massachusetts
February 28, 2007

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christopher Oddleifson, certify that:

1. I have reviewed this annual report on Form 10-K of Independent Bank Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the periodic report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Christopher Oddleifson

Christopher Oddleifson

Chief Executive Officer

Date: February 26, 2007

120

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Denis K. Sheahan, certify that:

1. I have reviewed this annual report on Form 10-K of Independent Bank Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the periodic report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Denis K. Sheahan

Denis K. Sheahan

Chief Financial Officer

Date: February 26, 2007

121

EX-32.1

Exhibit 32.1

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Independent Bank Corp. (the “Company”) on Form 10-K for the year ending December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the undersigned’s best knowledge and belief:

(a) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and

(b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Independent Bank Corp.  
(“Company”)

/s/  Christopher Oddleifson

Christopher Oddleifson

Chief Executive Officer

Dated this 26th day of February, 2007.

A signed original of this written statement required by Section 906 has been provided to Independent Bank Corp. and will be retained by Independent Bank Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

122

EX-32.2

Exhibit 32.2

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Independent Bank Corp. (the “Company”) on Form 10-K for the year ending December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the undersigned’s best knowledge and belief:

(a) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and

(b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Independent Bank Corp.
(“Company”)

/s/  Denis K. Sheahan

Denis K. Sheahan

Chief Financial Officer

Dated this 26th day of February, 2007.

A signed original of this written statement required by Section 906 has been provided to Independent Bank Corp. and will be retained by Independent Bank Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

123